Systematic Investment Plan, commonly referred to asan SIP, allows you to invest asmall sum regularly in your preferred mutual fund scheme. By activating an SIP, a fixed amount is deducted from your bank account every month, which gets invested in the mutual fund of your choice.
Every time you invest in a mutual fund scheme throughan SIP, you purchase a certain number of fund units corresponding to the amount you invested. You don’t need to timethe markets when investing through an SIP as you benefit from both bullish and bearish market trends. When the markets are down, you purchase more fundunits while you purchase fewerunits
when the markets are surging. Since NAV of allmutual funds are updated on adaily basis, the cost of purchase may vary from one SIP in stalment to another. Over time, the cost of purchase averages out and turnsout to be on the lower side. This is known as rupee cost averaging. This benefit is not available when you invest a lumpsum.