What is a SIP?
A Systematic Investment Plan automates a fixed-amount purchase of fund units at a regular interval - almost always monthly - instead of investing the full amount on one date (a Lumpsum). Each installment buys units at that date’s NAV, so a SIP naturally buys more units when the NAV is low and fewer when it’s high, averaging the entry price across many dates rather than betting on one.
CAGR assumes one lumpsum in, one withdrawal out - a single compounding rate between two dates. A SIP has money going in on a dozen-plus different dates, each compounding for a different length of time by the time you measure the return. That needs XIRR (see the XIRR glossary entry), the rate that makes the present value of every one of those cash flows, plus the final redemption value, net to zero.
Real example: Parag Parikh Flexi Cap Fund
Rolling SIP XIRR for Parag Parikh Flexi Cap Fund - Direct Plan - Growth, as of 2026-09-27 - each window simulates a monthly SIP that ran for that many years, repeated across every real starting month in the fund’s history.
CHART
Rolling SIP XIRR by holding period - min, median, max
Each group is one SIP duration. Unlike lumpsum CAGR, the range narrows faster here because a running SIP averages its entry price across many dates, not just one.
Fund: Parag Parikh Flexi Cap Fund - Direct Plan - Growth
How to use it in practice
A SIP invests a fixed amount at regular intervals, usually monthly. It builds discipline, since you invest without watching the market, and it averages your purchase cost: you buy more units when prices are low and fewer when they are high. It suits regular income and long horizons. Judge a SIP by XIRR, which accounts for each instalment’s date, not by a simple CAGR.
Common mistakes
A SIP does not guarantee a profit or protect against falling markets; it only spreads the entry points. It works only if you keep going through bad periods, and many investors stop at exactly the wrong time. SIP returns also depend on the dates chosen, so a single SIP result is less informative than the spread of results across many start dates, which rolling returns show.
Frequently asked questions
Is SIP safe?
A SIP is a method of investing, not a type of fund. Its risk depends on the fund you choose. It reduces timing risk but does not remove market risk.
What is the minimum SIP amount?
It varies by scheme, with many starting at ₹100 to ₹500 per month. Check the scheme’s own details.
How do I measure the return on my SIP?
Using XIRR, which accounts for the dates and amounts of each instalment, rather than a simple CAGR.
WHAT THIS MEANS FOR YOU Compare a fund’s SIP XIRR range against its own Lumpsum CAGR range (same fund, same holding period) rather than against a different fund’s number - the gap between the two tells you how much of the fund’s return variability gets smoothed out just by investing periodically instead of all at once.
METHODOLOGY Rolling SIP XIRR computed over every overlapping monthly-SIP window of each stated length in the fund’s real NAV history, as of 2026-09-27. Data: Punji NAV history. Not investment advice.