SIP Investment FAQs

1. What is SIP (Systematic Investment Plan)?

A Systematic Investment Plan (SIP) is an investment route offered by mutual funds, where investors can invest a fixed amount regularly (weekly, monthly, or quarterly) in a mutual fund scheme.

2. How does SIP work?

SIP works on the principle of regular investing. You invest a fixed sum in a mutual fund scheme regularly. Over time, your investments accumulate, and the power of compounding allows you to grow your wealth gradually.

3. What are the benefits of SIP?

SIP has numerous benefits, including regular savings habit, rupee cost averaging, power of compounding, and affordability. You don’t need a large sum to start; instead, you can start with as little as ₹500 per month.

4. How is SIP return calculated?

The SIP return is calculated using the future value formula, which factors in the invested amount, return rate, and duration. The formula used is:

SIP Return Formula: FV = P × ((1 + r/n)^(nt) - 1) / (r/n)

5. Is SIP a good option for long-term investment?

Yes, SIP is considered an excellent option for long-term investments. Over time, it allows you to benefit from market fluctuations and compounding, resulting in potentially higher returns.