Finance Investments

How does SIP compounding work in mutual funds?

QUICK ANSWER

SIP (Systematic Investment Plan) leverages rupee cost averaging and compound interest by reinvesting returns regularly over time.

Detailed Explanation

When you invest a fixed sum every month via SIP, you purchase more mutual fund units when prices are low and fewer units when prices are high. Over long horizons, compound interest generates exponential growth on both initial investments and accumulated gains.

Data Attribution & Rights

Source: Association of Mutual Funds in India (AMFI) (Open Data License)

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