SIP in ETF: How to Start Systematic Investing in Exchange-Traded Funds

Systematic Investment Plan (SIP) in Exchange-Traded Funds (ETFs) is a relatively new investment approach that is gaining traction in India. Unlike traditional SIPs in mutual funds, SIP in ETFs allows investors to regularly invest a fixed amount in ETFs, which track indices like Nifty 50 or Sensex. The increasing awareness of low-cost investing, transparency, and diversification benefits has made SIP in ETFs a popular option.

Can You Do SIP in ETFs Like You Do in Mutual Funds?

For those wondering how to start SIP in ETF, the process involves choosing a reliable broker offering ETF SIPs, selecting suitable ETFs, and automating regular investments.

While mutual funds offer a seamless SIP option through fund houses, SIP in ETFs differs slightly. ETFs trade like stocks, and setting up SIP requires a brokerage platform that allows periodic investments. Some platforms like Zerodha and Groww provide this feature, though it may not be as automated as mutual fund SIPs.

Understanding how to invest in ETF SIP can help investors systematically build wealth while benefiting from market growth. Seeking professional stock advisory services can further enhance investment decisions, ensuring the proper ETF selection and a disciplined approach to long-term financial planning.

What is an ETF (Exchange-Traded Fund)?

An exchange-traded fund (ETF) is an investment fund that holds a basket of stocks, bonds, or other assets and trades on stock exchanges like regular stock. ETFs aim to replicate the performance of an index, making them an easy way to invest in diversified portfolios.

How ETFs Differ from Traditional Mutual Funds

• Trading Mechanism: ETFs are bought and sold on exchanges like stocks, whereas mutual funds are transacted at NAV (Net Asset Value) at the end of the trading day.
• Expense Ratio: ETFs generally have lower expense ratios than actively managed mutual funds.
• Liquidity: ETFs offer intraday liquidity, while mutual funds do not.
• Tax Efficiency: ETFs tend to be more tax-efficient since they do not require frequent buying and selling of assets within the fund.

What is SIP in ETF?

Can you do SIP in ETF? The answer is yes. SIP in ETFs works by periodically investing a fixed amount into an ETF through a brokerage platform. Instead of purchasing ETF units directly from an AMC (Asset Management Company), you can buy shares of ETFs on the stock exchange at the current market price. Some brokers automate this process by placing buy orders at set intervals.

Why SIP in ETFs Offers the Best of Both Worlds

SIP in ETFs combines the benefits of systematic investing and ETF advantages, such as:

• Low-cost investing due to lower expense ratios.
• Market-linked returns that track indices closely.
• Flexibility to invest or exit at any time.

Is SIP Possible in ETFs in India?

SIP in ETFs is possible but depends on the brokerage platform. Some brokers offer a direct SIP feature in ETFs, while others require investors to place orders at regular intervals manually.

Direct vs Indirect SIP Setup for ETFs (Brokerage vs Mutual Fund Route)

• Direct SIP: Some brokers automate ETF SIPs by placing orders at a fixed frequency.
• Indirect SIP: Investors can set reminders and manually invest in ETFs periodically.

How to Start SIP in ETF

Let’s understand the Step-by-Step process of how to do SIP in ETF.

1. Choose the Right ETF Based on Your Goal

Select ETFs that align with your investment objective, such as Nifty 50 ETFs for passive investing or sectoral ETFs for focused exposure.

2. Select a Platform That Offers SIP in ETF 

Ensure your brokerage account allows SIP in ETFs and compare platforms based on brokerage fees and user experience.

3. Set Frequency and Amount of Investment

Decide whether you want to invest monthly, weekly, or quarterly and set a comfortable investment amount.

4. Enable Auto-Debit or Manual Reminders

Some platforms offer auto-debit options, while others require placing orders manually at regular intervals.

5. Track Performance Over Time

Regularly review the ETF’s performance and rebalance if needed to stay aligned with financial goals.

Pros and Cons of Doing SIP in ETFs

Advantages: Lower Cost, Market Returns, Diversification

• Low Cost: ETFs have lower expense ratios compared to mutual funds.
• Market Returns: ETFs track indices and provide market-matching returns.
• Diversification: Investors get exposure to a broad market segment with a single ETF investment.

Limitations: No NAV Lock-In, Brokerage Dependency, Volatility

• No Fixed NAV: Unlike mutual funds, ETF prices fluctuate throughout the day.
• Brokerage Charges: Some platforms charge brokerage fees per transaction.
• Market Volatility: ETF investments are subject to market risks and price swings.

Popular ETFs in India Suitable for SIP

1. Nifty 50 ETFs

Track the Nifty 50 index and provide exposure to India’s top 50 companies.

Here is a list of 10 Nifty 50 ETFs to invest:

Name	LTP (NAV) (as of 4.4.25)	Asset (in Crore) (as of 4.4.25)
UTI Nifty 50 ETF	249	56,411
Nippon Nifty 50 ETF	256	42,049
ICICI Pru Nifty 50 ETF	255	25,450
SBI Nifty 50 ETF	242	10,750
Mirae Asset Nifty 50 ETF	244	4,151
HDFC Nifty 50 ETF	253	3,830
Aditya Birla Nifty 50 ETF	26	2,983
Kotak Nifty 50 ETF	249	2,799
LIC Nifty 50 ETF	252	792
Axis Nifty 50 ETF	249	670

Source: Dhan.co

2. Sensex ETFs

Here is a list of  Sensex ETFs to invest: 

Name	LTP (NAV) (as of 4.4.25)	Asset (in Crore) (as of 4.4.25)
UTI	822	43,079
ICICI Pru	856	17,132
HDFC	85	955
LIC	876	781
Aditya Birla	74	315
Axis S&P	76	122
Mirae Asset	76	1
DSP Sensex	76	7

Source: dhan.co

3. Sectoral or Thematic ETFs

Invest in specific sectors such as banking, IT, or healthcare for targeted exposure.

Here is a list of thematic funds that have given more than 18% return in the last 3 years.

Name	Fund Size (in Crore)	3 Yrs. Return %
Franklin India Opportunities Fund	5,517	28
ICICI Prudential India Opportunities Fund	23,860	23
ICICI Prudential Manufacturing Fund	5,629	21
ICICI Prudential Exports & Services Fund	1,315	20
Quant Quantamental Fund	1,801	18

Source: ET Money

4. International ETFs 

Allow Indian investors to gain exposure to global indices like the S&P 500. These ETFs allow investors to diversify their portfolios beyond domestic markets. Some popular options include those tracking broad global indices like the Vanguard FTSE All-World UCITS ETF and the iShares Core MSCI ACWI UCITS ETF, providing exposure to developed and emerging markets. 

For specific regions, investors might consider the Vanguard FTSE Developed Markets ETF or the Vanguard FTSE Emerging Markets ETF. ETFs also focus on specific countries or themes within international markets, such as technology or dividend-paying companies, offering more targeted global exposure.

Best Practices Before You Start SIP in ETF

Before starting an ETF SIP, it’s essential to understand what is SIP and how it works. Analyze your financial goals, choose the right ETFs, and use an SIP calculator to estimate returns. Here are a few things that you have to keep in mind before investing in an ETF. 

1. Ensure Low Tracking Error

Select ETFs with minimal tracking error to ensure they closely mirror their benchmark index.

2. Understand Expense Ratios and Liquidity

Compare expense ratios and check the trading volume to avoid liquidity issues.

3. Avoid Over-diversification

Investing in too many ETFs may lead to redundant exposure. Choose a few well-diversified ETFs.

4. Stay Invested for Long-Term Compounding

SIP in ETFs works best to benefit from market growth and compounding when held long-term.

Conclusion

SIP in ETFs can be a good option for investors looking for low-cost, diversified, and systematic investing. It offers the benefits of index investing while allowing disciplined investments.

Select a reliable brokerage platform and a well-performing ETF to maximize returns and maintain investment consistency. Additionally, understanding what are SIFs (Specialised Investment Funds) can help investors explore alternative structured investments. Evaluating risk tolerance, using automated investment tools, and reviewing performance periodically ensure a strategic approach to ETF SIP investing for long-term financial growth.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

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