23 Sep, 2025
4 mins read
Exchange-Traded Funds (ETFs) have become a popular way for investors to diversify their portfolios with low costs and transparency. At the same time, Systematic Investment Plans (SIPs) are already well-known for mutual funds, where investors contribute small, regular amounts over time. Combining the two gives rise to a concept that’s gaining momentum in India: SIP in ETFs.
In this article, we will explain what ETF SIP means, how it compares with SIP in mutual funds, the advantages and drawbacks, and the best ETF options for SIP in India (2025).
An ETF SIP allows investors to systematically invest in Exchange-Traded Funds at fixed intervals, just like a mutual fund SIP. Instead of putting in a lump sum, investors contribute smaller amounts monthly or quarterly.
Here’s how it works:
Investors choose an ETF, such as a Nifty 50 or sector-based ETF.
A fixed sum is invested at regular intervals.
Since ETFs trade on the stock exchange, units are purchased at prevailing market prices.
This approach combines the discipline of SIP investing with the liquidity and cost efficiency of ETFs.
The debate of SIP vs ETF often arises when investors compare systematic investments across these instruments.
SIP in Mutual Funds: Investments are made in actively or passively managed funds. The NAV (Net Asset Value) is used for allotment.
SIP in ETFs: Units are purchased on the exchange at market prices. They track an index, commodity, or theme.
Key differences:
Cost: ETFs usually have lower expense ratios.
Execution: Mutual fund SIPs are automated, while ETF SIPs may need broker platforms for execution.
Liquidity: ETFs can be bought and sold anytime during market hours, unlike mutual funds.
In short, ETF SIPs are cost-efficient but require more active participation from the investor.
Lower Costs – ETFs have lower expense ratios compared to actively managed mutual funds.
Flexibility – Units can be traded intraday, giving liquidity to investors.
Discipline in Investing – Just like a mutual fund SIP, it encourages long-term wealth creation.
Diversification – Exposure to indices such as Nifty 50 ETFs or sector-specific ETFs.
Transparency – Prices are available in real-time on the stock exchange.
While attractive, ETF SIPs also have certain challenges:
Execution Complexity – Unlike SIP in mutual funds, not all brokers offer automated SIPs in ETFs. Manual execution may be required.
Liquidity Risks – Some ETFs may have low trading volumes, leading to wider bid-ask spreads.
No Direct Auto-Debit Facility – Unlike mutual fund SIPs, ETFs require buying through a demat account and broker platform.
Tracking Error – ETF performance may deviate slightly from the benchmark index.
If you’re wondering how to do SIP in ETFs, here’s a step-by-step approach:
Open a Demat and Trading Account – Mandatory for holding ETF units.
Choose the ETF – Select based on benchmark, liquidity, and historical performance.
Use Broker Platforms – Some brokers allow setting up SIP mandates in ETFs.
Manual Investment (if required) – In case auto-SIP isn’t available, schedule reminders to invest regularly.
Monitor Performance – Track your ETF’s performance against its benchmark.
While the “best” ETF varies based on investor goals, here are some popular choices widely considered in 2025:
Nippon India ETF Nifty BeES – Tracks the Nifty 50 Index.
SBI ETF Nifty Bank – For exposure to banking stocks.
ICICI Prudential Nifty Next 50 ETF – Provides diversification beyond the Nifty 50.
Kotak Nifty 50 ETF – Low-cost exposure to India’s benchmark index.
Gold ETFs – For diversification into commodities.
Investors should assess costs, liquidity, and tracking error before choosing the best ETF for SIP.
Cost-Conscious Investors – Those seeking lower expense ratios.
DIY Investors – Comfortable with using demat accounts and broker platforms.
Long-Term Investors – Who want disciplined investing in indices or sectors.
Diversifiers – Looking to expand beyond mutual funds.
If you prefer a completely hands-off approach, mutual fund SIPs may be easier. But for those willing to take a slightly more active role, ETF SIPs can be a powerful wealth-building tool.
SIP in ETFs is a hybrid approach that combines the simplicity of systematic investing with the cost-efficiency and flexibility of ETFs. While challenges such as liquidity and manual execution exist, the benefits of lower costs, transparency, and diversification make it a strong alternative to mutual fund SIPs.
By carefully selecting the best ETF options for SIP in India (2025) and maintaining discipline, investors can use this method to build long-term wealth.
It is a way of investing small amounts regularly in Exchange-Traded Funds, similar to mutual fund SIPs but through the stock market.
Open a demat account, select an ETF, and invest regularly through a broker platform. Some brokers allow automated SIPs, while others require manual execution.
ETFs are cheaper and more flexible but need active management. Mutual funds are easier to set up and manage. Choice depends on investor preference.
Popular options include Nippon India ETF Nifty BeES, SBI ETF Nifty Bank, ICICI Prudential Nifty Next 50 ETF, Kotak Nifty 50 ETF, and Gold ETFs.
Calculate your Net P&L after deducting all the charges like Tax, Brokerage, etc.
Find your required margin.
Calculate the average price you paid for a stock and determine your total cost.
Estimate your investment growth. Calculate potential returns on one-time investments.
Forecast your investment returns. Understand potential growth with regular contributions.
You have successfully submitted your partnership request form. You will be hearing us soon!
Back
