SIP works on the principle of regular investment. It's like your recurring deposit in which you enter a small amount every month.

It gives you the freedom you once invested heavily in money to replace short-term mutual funds to invest (monthly or quarterly). SIP allows you to invest instead feature 10 split will invest Rs 500 simultaneously Rs 5,000 in a mutual fund.
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This allows you to invest in mutual funds without affecting your other financial responsibilities. To understand better how SIP works, it is important to understand the rupee cost averaging and the power of compounding.


SIP has brought mutual fund investment within the reach of an average man as it also makes it possible for those tight budget people who can invest 500 or 1,000 rupees on a regular basis instead of investing big at a time.

SIP has brought mutual fund investment within the reach of an average man as it also makes it possible for those tight budget people who can invest 500 or 1,000 rupees on a regular basis instead of investing big at a time.

Not only ths, it also saves the rich people from the possibility of investing at the wrong time and place. However, the real benefit of SIP comes from investing at a lower level.

Other benefits of SIP

  • Disciplined Investment-
The main rule to maintain the security of your funds are Keep constant investment, focus on your investments and maintain discipline in the way of investment. By withdrawing some amount every month, you will not get much difference on your monthly income. It would be better for you to save some money every month by withdrawing the money collected for big investment.
  • Power of compounding of Rupees
Investment gurus suggest that a person should always start investing early. One of the main reasons for this is the benefit of getting compound interest. Let's learn this with an example. Prasoon (A) starts saving Rs 1,000 every year from the age of 30, while Prasoo (B) also saves the same amount but from the age of 35. When both get their invested money at the age of 60 years, (A) has a fund of 12.23 lakhs and (B) has only 7.89 lakhs. In this example we can assume returns at the rate of 8%. So it is clear that the difference of investment of Rs 50,000 in the beginning has an impact of more than 4 lakhs on the last fund. This is due to the power of compounding. The longer you invest, the more you will get returns.

Now suppose that (a) instead of investing 10,000 every year, invests 50,000 after 5 years from the age of 35, in this case his invested money will remain the same (which is 3 lakh) but he should be 60 years old The fund (fund) is found in 10.43 lakhs. This shows that even after putting the same amount of money in late investment, one loses the benefit of compound interest initially.
  • Rupee Cost Averaging
It is mainly useful for investing in stocks. When you invest the same amount of money in a fund at frequent intervals, you buy more units of stock in times of lower rupee value. Thus your average price per share or (per unit) decreases over time. It is an average cost policy of Rs. Which is designed for a long term sensible investment. This feature reduces the risk of investing in volatile markets and keeps you comfortable in the ups and downs of the market.

Those who invest through SIP can handle the ups and downs of the market as well as the time of market growth. The average cost of your investment by SIP is low, even when you go through all kinds of high or low levels of the market.
  • Suitable
It's very simple way of investing. All you have to do is to deposit the check along with the completed enrollment form so that the check will be deposited in the Mutual Fund on the date you said and share units will come in your account.
  • Other Benefits
  1. There is no tax or fee for investing or withdrawing money in SIP investment.
  2. The tax on capital gains (wherever applicable) depends on the time of investment.