A Systematic Investment Plan, or SIP, is simply an instruction to invest a fixed amount into a mutual fund scheme on a fixed date every month. That is the whole mechanism — the rest is discipline.
What happens behind the scenes
Once you register a SIP, an auto-debit mandate (NACH or UPI Autopay) is set up between your bank account and the registrar. On your chosen date, that amount is debited and used to purchase units of the scheme at that day's Net Asset Value (NAV). Some months the NAV is higher, some months lower — you simply get more units when prices are down and fewer when prices are up.
Why the date matters
Choosing a SIP date that lands two or three days after your salary credits reduces the chance of a bounced instalment. A failed debit does not cancel your SIP outright, but repeated failures can lead to the mandate being deactivated by the bank.
A word on risk
A SIP is a mode of investing, not a product in itself. The scheme you choose still carries the market risk of its underlying category — equity schemes will still see their NAV rise and fall with the market. Mutual Fund investments are subject to market risks; please read all scheme related documents carefully before investing.
