What is a Systematic Investment Plan?

A Systematic Investment Plan, also known as SIP, is a simple and easy mode for investing money in mutual funds. With the help of SIP you can invest a certain pre-determined amount at a regular interval, for example, weekly, monthly, quarterly, etc.


You can also call it as a planned approach towards wealth generation. Investing through SIP will help you inculcate the habit of regular saving and building wealth for the future.

How does a SIP work?

SIP is one of the most flexible and easy investment plans. You can select auto-debit option from your savings bank account to transfer money into a specific mutual fund scheme. When you invest in a mutual fund, you get certain number of units based on the ongoing market rate, known as net asset value (NAV), for the day.

Each time you put money, additional units of the mutual fund scheme are purchased at the current market rate and added to your account. As these mutual fund units are bought at different rates each time, the investors benefit from Rupee-cost averaging and the power of compounding.

What is 'Rupee-cost averaging'?

With Rupee-cost averaging, a regular investor gets the benefit of fetches more units when the price is low and lesser when the price is high. It may help you to achieve a lower average cost per unit when the market is volatile.

What is 'Power of compounding'?
The Power of compounding can be understood with the simple rule for compound interest - the sooner you start investing, the more time your money has to grow.

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