What is SIP in a mutual fund

What is SIP in a mutual fund

Saving and increasing your wealth are as much as important as earning money. Each one of us earns money in one way or the other. But if you fail to save and increase the money that you are incoming then there will be no value to earning the money. The best way to achieve this goal is by investing the money and when it comes to investment, the name of the mutual funds comes first. But why are the mutual funds so efficient in saving and offering huge returns on the invested money? Well, the answer lies in Systematic Investment Plan or SIP.

Desires and dreams are good to have since they act as motivation for a lot to succeed in life. If nothing is done to realise your goals the dreams get labelled as delusion. A step by step process of saving and investing your money in mutual funds might push you close to your target. With SIP (Systematic Investment Plan) these periodic instalments of invests can go as low as Rs 500. SIPs can be really flexible and with periodic investment on mutual funds you can watch your money accumulate, grow and bring back multiples of its worth. You can find the top Mutual funds in the market from here.

What is SIP?

Systematic Investment Plan (SIP) are efficient financial tools that help the investor to create healthy habits of saving with small investments over monthly or quarterly intervals. It has been a boon to the average investor since it eliminates a lot of complications as well as compounds their wealth.

How does SIP work?

Each interval your money through SIP is used in purchasing additional units on a given date of each month. Your money is either auto-debited or added through postdate checks. With SIPs you get to buy units each month at different market rates and thus reduce your risks with Rupee-Cost-Averaging. Rupee Cost Averaging gives an upper hand to the SIP investor since they are not affected so much by the volatile market.

Benefits of SIP

There are several benefits of SIP that is usually not enjoyed by other methods of saving or investments in mutual funds.

  • Financial Discipline: Just like other regular monthly payments like power bills or phone bills, investments with SIP create a habit of setting aside money for saving.
  • Lesser obligation: SIP invests allow investors to pull out of the scheme at their convenience. Long term SIP invests can be really helpful but not compulsory. The amount that is being invested through SIPs can even be adjusted to be increased or decreased.
  • Beneficial in the long run: With SIPs sooner you start saving money the more time it has to grow. The market volatility is also less risky to the SIP investor.
  • Hassle free: SIP payments can be done with the utmost comfort of the investor in mind. You can ask your bank to auto debit your monthly invests from your bank account or write a postdated checks to them. Whichever you are more comfortable with.
  • Market Timing Independent: Since SIP investors are usually in it for the long-term gains market volatility is not an issue and is negated with time. Moreover, the investor need not bother when to enter or exit the market due to soaring stocks or declining rates.

To know more about the benefits of SIP, watch this video!


All in all, SIPs are great for the average investor who does not have an in-depth knowledge of the market. The SIPs most definitely would break the inflation bounds and can act as a rainy day or retirement funds with as early investments as possible. The only basic decision to be made is carefully choosing a mutual fund which has a time-tested track record and good wealth managers.

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