I keep hearing people say start a SIP to build wealth but what exactly is a SIP? Is it different from investing directly in mutual funds?
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Systematic Investment Plan(SIP) is a plan of investing in mutual fund where a fixed amount is invested at regular intervals, typically monthly, rather than a lump sum.
Person A wants to pay his son’s college fees after 10 years. So, he starts a SIP of ₹5,000/month in a mutual fund. Assuming 12% annual returns, he can build around ₹11.6 lakhs in 10 years.
That’s how SIP helps you reach long-term goals with small monthly
investments.
Benefits of SIP-
1. Builds a Habit of Saving
SIP makes you invest a fixed amount every month, helping you save regularly without thinking too much about it.
2. Start with a Small Amount
You don’t need a big amount to begin. SIPs can start from as low as ₹500 per month, making it accessible for everyone.
3. No Need to Time the Market
Since you’re investing every month, you don’t need to worry about whether the market is up or down — your investments get averaged out over time.
4. Rupee Cost Averaging
When markets are low, you get more units. When markets are high, you get fewer. Over time, this helps average out your buying cost.