About Systematic Investment Plan (SIP)
A Systematic Investment Plan (SIP) is an investment strategy offered by mutual funds where investors can invest a fixed amount regularly, typically monthly or quarterly. SIPs allow investors to benefit from rupee-cost averaging and the power of compounding.
Benefits of SIP
- Disciplined Investing: Regular investments help build a habit of saving
- Rupee-Cost Averaging: Buying more units when prices are low and fewer when prices are high
- Power of Compounding: Earning returns on your returns over time
- Flexibility: Start with small amounts and increase over time
SIP Calculation Formula
M × ({[1 + r]n - 1} / r) × (1 + r)
Where:
- M = Monthly investment amount
- r = Monthly rate of return (Annual rate / 12)
- n = Number of months