Systematic investment plan

A standing instruction to invest a fixed amount in a mutual fund each month.

₹10,000 invested at the start of every month for ten years, earning 1% a month, compounds to about ₹23,23,391 against ₹12,00,000 contributed. At 12% a year compounded annually, about 0.95% a month, the same plan reaches about ₹22.4 lakh, so check which convention a calculator uses.

Its value is behavioural rather than mathematical. Investing a fixed sum at regular intervals buys more units when prices are low and fewer when they are high, which helps, but the larger benefit is that it removes the decision to invest from a person who would otherwise make it worst at the bottom of a market.

So why not invest a lump sum? It beats a SIP on average in a rising market, but almost nobody does it consistently.