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Understanding the Power of Systematic Investment Plan

by Ruby Singh - 05 Aug 2022, Friday 76 Views Like (0)
Understanding the Power of Systematic Investment Plan

Rakesh was 25-year-old and he found himself in a predicament. It has been only a few months since he acquired his first job, and a major portion of his paycheck went towards meeting his recurring expenses such as rent, EMIs and utilities. Rakesh had around Rs. 2,000, which was enough to save up, but it was not enough to invest at the end of each month.  So a  friend of his at work told him about an easy way to invest in mutual funds with whatever he could save up each month. Then, Rakesh discovered that the rewarding investment strategy was known as a Systematic Investment Plan or SIP.

The investment strategy seemed promising, but being conscientious and methodical, he decided to read up a little more and gain more knowledge about SIPs and understand the power of a Systematic Investment Plan before applying that strategy. These were the Discoveries made by Rakesh before applying!

 What is a Systematic Investment Plan?

 An investment strategy where you invest a fixed amount of money at regular intervals, which is similar to a recurring deposit scheme is known as a Systematic Investment Plan or SIP.

Most of the Systematic Investment Plans are associated with an investment in mutual funds. Therefore, a Systematic Investment Plan or SIP can be used to invest in debt funds, hybrid funds, equity funds, and as well. Systematic Investment Plans rising in popularity. Why? One of the main reasons for its popularity is that it is  extremely customizable. Every aspect of the plan can be customised according to your needs - including the amount of money that you invest in the period as well as the frequency of investment. Before starting your Investment in SIP, you can take into account various factors like your long-term investment budget,  your goals, along your risk profile before starting your SIP. Setting up a SIP on any investment app will also be smooth and straightforward.  

The power of a Systematic Investment Plan is so powerful and utilises the concept of rupee cost averaging. 

What is rupee cost averaging?

Whenever you invest in mutual funds, either you can choose to invest a lump sum amount in the fund of your choice at one go, or you may adopt a Systematic Investment Plan, where you will be able to invest a fixed sum at periodic intervals regularly. Your cost remains fixed at whatever price you purchase the mutual fund units when you are opting for the lump sum investment option. In SIP. you invest regularly on a periodic basis. In the case of an equity fund for example, on some debit dates the market is up and on other days market is down. This results in averaging out the costs incurred for buying units. However, if you purchase a lump sum when the market is high it will take some time to reflect the gains.

Other benefits of a Systematic Investment

The power of a Systematic Investment Plan is not limited to rupee cost averaging only.

There are some other benefits too which you can reap by implementing in your investment strategy. These benefits include:

1. The need to time the market is eliminated in SIP.

2. SIP helps you adopt both a disciplined investment approach and strategy.

3. It benefits you for a long-term period.

4. SIP also reduces market risk and reduces the effects of market volatility.

5. SIP is one of the easiest strategies of investments to execute.


The Systematic Investment Plan option is one of the easiest and most convenient investment strategies for new investors who want to start small. If you just want to venture into the world of mutual funds, you have to consider adopting this strategy. You can start your Systematic Investment Plan by investing regularly in a disciplined manner and you can meet your financial goals without any trouble. SIP is also highly useful for people who do not have or want to invest a lump sum amount in one go.