What is SIP?
A Systematic Investment Plan (SIP) is an investment vehicle offered by mutual funds. It allows investors to invest a fixed amount regularly in a mutual fund scheme, typically monthly or quarterly.
SIP works on the principle of rupee-cost averaging, helping you ride out market volatility while building wealth steadily over time.
Benefits of SIP
- Disciplined Investing Approach
- Power of Compounding
- Rupee-Cost Averaging
- Start with as low as ₹500
- Flexibility to Pause or Modify
- Automated Process
How SIP Works
When you start a SIP, you invest a fixed amount at regular intervals. This approach ensures:
- You buy more units when prices are low
- You buy fewer units when prices are high
- Your average cost per unit reduces over time
- Your investment grows through compounding
Tips for SIP Investing
- Start early to maximize returns
- Invest consistently for better outcomes
- Choose diversified mutual funds
- Review your investments periodically
- Consider Step-Up SIPs (Top-Up SIPs)
- Link SIPs to Specific Goals
Common SIP Mistakes
- Stopping SIPs during market downturns
- Investing without clear financial goals
- Not considering inflation in calculations
- Frequent switching between funds
- Focusing only on past performance