We often hear about SIP plans when it comes to investment. What is SIP?

SIP stands for Systematic Investment Plan. SIP is a method of investing in mutual funds periodically in a disciplined manner. It enables us to invest our money periodically, may be monthly, quarterly, half-yearly etc. In SIP, we invest a predefined amount on a particular date (each periodic cycle) to a given mutual fund. In the last few years, more people are participating in SIP plans and it became one of the popular financial terms.

Here are the key benefits of SIP:

1. Disciplined investment or savings: Beginners who just started savings and investments, face difficulty to save enough. By opting for SIPs, we choose to invest on a regular interval. Gradually, it brings discipline in our financial habits.

2. Pocket friendly : One can start SIP with a minimum of 500 rupee in a month. It makes SIP pocket friendly and investors can select the higher amount based on their budget.

3. Enjoy the Compounding effect: We invest small amounts over the period in SIP and we get the final amount after maturity. If we are investing for a longer period the returns would be higher and we can see the exponential growth due to compounding. 

4. You can skip if the budget is tight: Sometimes we are out of budget and do not have sufficient balance in our bank account. Some SIP plans allow us to skip one or two months without any charges and then we can continue it later on. We need to notify them at least 30 days in advance.



5. Protection against the volatile finance market : SIPs are consistent and not based on speculation of investors. It helps us avoid short term risks, panic from market situations, emotional reactions etc. while investing.