A Systematic Investment Plan (SIP) lets you invest a fixed amount in a mutual fund at regular intervals — usually monthly. For salaried investors in India, SIPs are popular because they automate investing, reduce the urge to time markets, and can be raised when income grows.
What actually happens each month
On the SIP date, your bank mandate or UPI auto-pay sends money to the AMC/registrar. The fund allots units at that day’s applicable NAV (subject to cut-off rules). Over time you accumulate units at different NAVs — this is rupee-cost averaging in practice, not a guarantee of profit.
Direct plans typically charge a lower expense ratio than Regular plans sold through distributors. The calculator on EnrichReturns uses your assumed return and does not subtract expenses separately; pick a conservative expected return if you want a buffer.
Returns: illustration vs reality
SIP calculators compound at a smooth monthly rate. Real equity NAVs rise and fall. A 12% long-term assumption is a planning input, not a promise — categories, fund choice, and market cycles all matter.
Near a goal date, sequence-of-returns risk matters: a sharp fall just before you redeem can hurt even if the long-term average looked fine. Many planners gradually reduce equity risk as the goal approaches.
How to size a SIP
Start from the goal (education, house down payment, retirement), inflate today’s cost if needed, then back out the monthly SIP with a Goal Planner or SIP calculator. Check that total SIPs plus EMIs still leave room for an emergency fund.
Step-up SIPs (raising the amount yearly with salary hikes) often matter more than obsessing over a 1% higher assumed return.
Taxes and common mistakes
Mutual-fund taxation depends on fund type and holding period under current law — confirm with a CA or the latest rules before redeeming. Common mistakes: skipping the emergency fund, chasing last year’s top fund, ignoring expense ratios, and treating SIP maturity projections as guaranteed.
EnrichReturns tools are educational. They are not SEBI-registered advice and do not replace reading scheme documents.