A Systematic Investment Plan (SIP) is a vehicle offered by mutual funds to help investor save regularly. It is just like a recurring deposit with the bank where investor put in a small amount every month. The difference here is that the amount is invested in a mutual fund.
 
The minimum amount to be invested can be as small as Rs 100 and the frequency of investment is usually monthly or quarterly.

Features of SIP

• A specific amount is invested for a continuous period at regular intervals under this plan.




• SIP is similar to a regular saving scheme like a recurring deposit. It is a method of investing a fixed sum regularly in a mutual fund.




• SIP allows the investor to buy units on a given date every month. The investor decides the amount and also the mutual fund scheme.




• While the investor's investment remains the same, more number of units can be bought in a declining market and less number of units in a rising market.




• The investor automatically participates in the market swings once the option for SIP is made.

• Saving a small sum of money regularly at an early age makes money work with greater power of compounding with significant impact on wealth accumulation.





• SIP helps in averaging cost of acquiring units





• It is very convenient. SIP can be operated by simply providing post dated cheques with the completed enrolment form or give ECS instructions. The cheques can be banked on the specified dates and the units credited into the investor's account.




• It helps in creating wealth over a longer time period.



• It makes investor disciplined in their savings.