Keeping it short and simple, Systematic Investment Planning referred as SIP is a tool used or vehicle offered by mutual funds to invest in mutual funds. SIP is not the plan or scheme but SIP is a mode or a way to invest which allows an investor to decide the investible surplus in systematic and regular manner and then plan for SIP and the decided amount will be debited from investor’s account at a fixed amount, fixed date, fixed mutual fund scheme.

You can compare SIP with the Old concept of Recurring Deposits with a bank, where our elders use to deposit the fixed sum of money. The frequency of SIP is usually daily, weekly, or monthly. SIP is considered to encourage disciplined approach towards investment.

SIPs are flexible in nature and allow the investor to start and stop anytime or may choose to increase or decrease the SIP amount. SIP can be done with as minimum as Rs. 500/- per month thus is accepted majorly by the retail investor who does not have the resources to pursue the active investment.

SIP investment is a good option for those investor who do not posses enough knowledge of financial markets and the benefits of SIP is it reduces the average cost of units purchased.