Introduction To SIP And Its Advantages In Online Share Trading

Introduction To SIP And Its Advantages In Online Share Trading

In online share trading, one of the most popular investment strategies is the Systematic Investment Plan (SIP). SIP allows investors to invest a fixed amount regularly in mutual funds at predetermined intervals. It offers several advantages that make it an attractive option for investors in share trading. It's convenient and flexible, allowing investors to start small and gradually increase their investments over time. 

Moreover, investing at regular intervals helps to develop disciplined investing habits and eliminates the need for market timing. The benefits of SIP go beyond this. Let's learn more about SIP and its benefits in this article.

What is the Full Form of a SIP?

If you are new to the world of investing and wondering what is the full form of a SIP, it stands for Systematic Investment Plan. A SIP is a way to invest a small amount regularly in your favorite mutual fund scheme. Every month, a fixed amount gets deducted from your bank account and invested in the mutual fund you choose. Let us understand more in detail about what SIP investment is and how it works in the next section.

What is SIP investment?

What is SIP investment–basically, it is a method for investing in mutual funds in which investors contribute regularly, and automatically. Investing in SIPs allows you to meet your financial goals over the long term. However, make sure you figure out how much you want to put into a mutual fund scheme at regular intervals.

Let us understand what SIP investment is with an example. Say you want to invest Rs. 500 each month for five years. You can establish a SIP with a mutual fund and automate your contributions. Additionally, you can choose how often to contribute. In SIP mutual funds, you can invest weekly, monthly, quarterly, half-yearly, etc.

In mutual funds, it's essential to understand what SIP is because it's not an asset on its own but rather a method of investing in mutual funds.

Advantages of SIP

Now that you understand what SIP is, let's talk about its advantages. There are tons of benefits to SIPs for investors of all ages and risk profiles. Here are some of the most impressive advantages of SIPs:

It makes you a disciplined investor

If you don't know how the stock market works, SIPs are a great option for you. You don't have to analyze the share market movements or decide when to invest. SIPs let you relax because they auto-deduct money from your account and go to your mutual funds. Furthermore, it ensures that you work actively towards making your investments grow since it's periodic.

Rupee Cost Averaging

Investing in equity funds with SIPs means you don't have to time the market. Through the SIP, you invest a fixed amount regularly across stock market levels. It helps you buy more equity fund shares when the market's crashing and fewer shares when it's rising. Your investment will be less affected by short-term market fluctuations since you'll be averaging out the cost over time.

Power of compounding

You can benefit from the power of compounding by investing in equity funds through SIP. It works by multiplying your earnings over time, especially when you invest in equity mutual funds. It's about earning returns not only on your initial investment but also on the returns you've already made. In simple terms, it's like earning interest on your interest. This compounding effect can significantly boost your overall returns and help your money grow faster in the long run. Also, starting early and staying invested for a long time allows your investment to grow significantly. 

Managed by professionals

Mutual funds are managed by experts who have proven track records as portfolio managers. In addition, they have a team of research analysts who monitor the markets. Thus, you benefit from the fund manager's expertise. This is especially important for people who don't know much about financial jargon. Hence it's better to put your money in the hands of an expert instead of risking it. With SIPs, you have the advantage of outsourcing investment expertise to a fund manager who takes care of managing the fund's assets to maximize returns.

Ease of Investing

Investing in equity funds through SIP is a great way to build wealth. SIP allows you to invest as little as Rs 500 a month. Your bank gets standing instructions to deduct the amount from your account every month.


In online share trading, SIP (Systematic Investment Plan) is a popular investment strategy. This allows investors to start small and increase investments gradually. Moreover, investing through SIPs has advantages such as rupee cost averaging, which lowers the impact of market fluctuations, and compounding, which boosts returns. You can easily set up and manage SIP investments using a share trading app. A SIP also provides investors with the expertise of professional fund managers, making it easier for them to build wealth. To trade shares online, it is important to understand what SIP is, as it is an easy-to-use and effective method.

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What is SIP FAQs

The SIP stands for Systematic Investment Plan.

A SIP is a way to invest a fixed amount regularly, either monthly or quarterly, into a mutual fund scheme that you choose. It allows you to gradually build your investment over time and benefit from the power of compounding.

The power of compounding shows up in a Systematic Investment Plan (SIP) when people reinvest their earnings and earn even more interest as time goes by. An investor with a limited amount of money can benefit from SIP's wealth-building features.

For SIPs, the minimum period is usually 6 months, but it varies by fund.

According to most experts, SIP investments should be kept for at least five years to create wealth.