Question 1

What is a SIP (Systematic Investment Plan)?

Accepted Answer

A SIP is a method of investing a fixed amount regularly (usually monthly) in mutual funds. It helps in rupee cost averaging and removes the need to time the market.

Question 2

How are SIP returns calculated?

Accepted Answer

SIP returns are calculated using the XIRR (Extended Internal Rate of Return) method, which accounts for the timing and amount of each investment. The future value is computed using compound interest on each installment.

Question 3

What is the minimum amount to start a SIP?

Accepted Answer

Most mutual funds in India allow SIPs starting from Rs. 500 per month. Some funds have a minimum of Rs. 100 or Rs. 1,000 depending on the AMC and scheme.

Question 4

Is SIP better than lump sum investment?

Accepted Answer

SIP is generally better for volatile markets as it averages out the purchase cost through rupee cost averaging. Lump sum can outperform in consistently rising markets. The best approach depends on market conditions and your cash flow.

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