SIP is an option through which the investor can decide to invest a fixed amount on a monthly basis for a fixed period in the scheme(s) of his choice. SIP in an equity fund acts as a tool to create wealth in the long-term.
There are several advantages of opting for an SIP in an equity fund:
Allows the investor to invest even a small fixed sum of money at regular intervals.
It reduces risk by making volatility work in investor’s favor.
It provides the benefit of rupee cost averaging — investors gets more units at low NAV and vice-versa.
Power of compounding allows small amounts to grow into a significant amount in due course of time.
Imparts time tested discipline to investing and helps to manage anxiety caused by dips in the market.