The Full form of SIP is Systematic Investment Plan. SIP is one of the investment methods available in the market, in which an investor can put a fixed amount in the several mutual fund schemes at pre defined regular intervals being monthly or quarterly and at the same time, enjoying the dual benefits of high returns of the stock market and full safety of debt market. It helps the investor to create a significant wealth by investing small sums of money in the long-run.
In simple words, it is a planned approach towards investments that helps to inculcate a habit of saving and to create wealth for the future. SIP follows the principle of constant or regular investments. The amount to be invested is auto-debited from the account of the investor periodically. So, in the Systematic Investment Plan, the investor doesn’t need to be time-bound by the market, it buys units each month on a given date with the amount debited from the account.
If the price of the unit is low on that day, more units will be bought and if the price is high, lower units will be bought with the same amount. The main feature of SIPs is that it allows an investor to invest and withdraw the money anytime and it has no fixed tenure.