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What is SIP in Mutual Fund?

A systematic investment plan, known as SIP, is a service provided by mutual funds that allows investors to invest in a disciplined way.

SIP allows an investor to invest a certain amount of money in a mutual fund scheme or stocks at predetermined intervals.

The set amount can be as little as Rs 500, and the pre-defined SIP periods can be weekly, monthly, quarterly, semi-annually, or yearly. By investing via SIP, the investor invests in a time-bound manner without having to worry about market dynamics and stands to gain in the long run owing to average costs and the power of compounding.

The compounding impact magnifies the benefits of investing frequently through SIP and throughout the long run.

The compounding effect guarantees that you get returns not only on your principal amount (real investment), but also on the gains on the principal amount, which means that your money grows over time as the money you invest generates returns.

If you invest in the best mutual funds with a consistent performance track record supported by quality portfolio characteristics, SIPs can prove to be a rewarding experience.

That said, make it a point to review your mutual fund portfolio regularly (once in six months). This will ensure you are on the right path to wealth creation and building the required corpus to fulfil your financial goals.

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