How SIPs Work

When you start a SIP, you authorise your bank to debit a fixed amount (say ₹5,000) on a set date each month. That money is invested in units of a mutual fund at the prevailing NAV (Net Asset Value — the fund's unit price).

Month-by-month example (₹5,000 SIP):

| Month | NAV | Units Purchased | |---|---|---| | Jan | ₹100 | 50.00 | | Feb | ₹90 | 55.56 | | Mar | ₹110 | 45.45 | | Total | | 150.01 units for ₹15,000 |

Average cost per unit: ₹15,000 ÷ 150.01 = ₹99.99 (lower than ₹100 average NAV). This is rupee-cost averaging.

Why SIP Beats Lump Sum for Most Investors

  • No need to predict market highs/lows.
  • Emotional discipline — you invest regardless of market noise.
  • Builds the habit of investing before spending.

    • SIP in a Bear Market is a Feature, Not a Bug

    When markets fall, your SIP buys more units at lower prices. Those cheap units generate outsized gains in the eventual recovery. Stopping your SIP during a downturn is the single most common investor mistake.

    Choosing a SIP Amount

    A practical approach: invest 20% of your net income via SIP. Start lower if needed, but commit to increasing the amount by 10% every April (start of financial year).

    > Altius Tip: SIP date matters less than SIP habit. Pick the 1st or 5th of the month (a few days after typical salary credit) and automate it. Don't overthink the date.