What Is A Systematic Investment Plan (SIP)?
This is a series of explainers to educate and inform new investors. In association with Dun & Bradstreet India as knowledge partner.
Systematic Investment Plan (SIP): Definition, Meaning & Basics
Investments can be made either in a lump sum or periodic instalments. A systematic investment plan is a method of investment in which an investor invests an amount, typically fixed, at regular frequencies (for instance every month) over a period of time in a mutual fund.
And while an SIP is often associated with mutual fund investments, an investor can use it for investing in fixed deposits, gold, etc.
An SIP has some obvious advantages—inculcating a disciplined approach to savings and achieving financial goals—it also helps in averaging the cost of investment. Using an SIP, a mutual fund investor can invest at different net asset value over a period of time. This helps in averaging the cost of NAV and managing volatility.
The effectiveness of an SIP, as an investment method, depends on the performance of the asset or scheme in which the investor has invested his money.
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