Lesson 1 of 3 · 7 min
SIP: the habit, honestly
A fixed amount on a fixed date, automatically. What rupee cost averaging actually does to your unit count, and the magic it is still wrongly credited with.
A SIP — systematic investment plan — is not a product. It is a method: a fixed amount goes into a chosen fund on a fixed date, automatically.
The same ₹1,000 buys more units when the NAV is low and fewer when it is high. That is the entire mechanism, and it has a name: rupee cost averaging.
Your turn
Your SIP invests ₹1,000 a month. Month 1 the NAV is ₹50; month 2 it falls to ₹40. How many units do you own after two months?
Myth
“Rupee cost averaging means a SIP protects you from losses.”
False
Averaging lowers your average cost per unit compared with buying the same units at the average price. That is all. It cannot make a falling fund rise: a SIP into something that never stops falling loses money — just gradually. What the method genuinely removes is the impossible job of timing the market, and the temptation to try.
If it buys through the fall, doesn't that cancel the fall?
KabirTara
Kabirasking
If my SIP carries on buying while the NAV drops, doesn't the averaging cancel out the fall?
Taraexplaining
It lowers what you paid on average per unit. That is real, and it is the only thing it does. If the fund itself never recovers, a lower average cost simply means you lost more slowly.
Kabirasking
Then what is the method actually for?
Taraexplaining
It takes one impossible job off your plate — picking which day is the right day to buy. The instruction decides for you, on a date you chose once, back when you were calm.
Kabirasking
And the months when the whole app is red?
Taraexplaining
Those are the months your fixed amount collects the most units. What that turns into depends on the fund and on what happens next, which is exactly why nobody can hand you a number in advance.
Work it out yourself
Enter your own monthly amount and your own assumed rate — the calculator has no default rate on purpose, because nobody can promise you one. Move the rate up and down and notice how much the answer swings on that single assumption.
SIP Calculator (with step-up)Quick check
The NAV of your SIP's fund drops for three months in a row. What happens to the units your fixed amount buys?
Check yourself
1 / 3
Kabir asks
A friend says they "invested in a SIP". What is slightly off about that sentence?
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