Why SIP is the Ideal Route for First-time Investors

Does the volatile world of investing seem intimidating as a newbie investor? But you also understand the merits of investing early to build wealth. So how do you go about it?

Why SIP is the Ideal Route for First-time Investors

Well, adopting the SIP route could be the wisest first step you take towards securing your financial future!

An Overview of SIP 

SIP or Systematic Investment Plan allows you to invest fixed small amounts regularly – say Rs. 5000 every month – into mutual funds schemes of your choice. This makes SIP ideal for new investors to get their feet wet without worrying about market timing or stock selection skills initially.

Over longer timespans of 5, 10 or 20 years, SIPs help you reap superior inflation-beating returns compared to traditional options like FDs, RDs or savings accounts. Power of compounding and rupee cost averaging makes SIP a winner!

Top Benefits of Investing Through SIP

1. Cultivates Investing Discipline  

By committing upfront to invest consistently via SIPs, you ingrain financial discipline seamlessly into life essential for long-term investing success. Automate SIP payments so they are deducted automatically on a set date every month or quarter.  

Set annual reminders to increase SIP amount by 10-20% whenever salary increments happen. Auto-pilot investing removes the temptation of tweaking investments in reaction to market ups and downs. 

2. Rupee Cost Averaging 

Stock markets are highly volatile daily and too unpredictable for even professional investors to time correctly every time. SIPs simplify investing in such volatile environments by allowing rupee cost averaging to work its magic.

You automatically buy more fund units when the market falls thus bringing down the overall average acquisition cost per unit. This averages out market highs and lows over longer periods to deliver steadier overall returns.

3. Harnesses the Power of Compounding

The earlier you start investing, the longer time period available for investment gains to compound over the years exponentially. 

For example, investing Rs. 10,000 monthly in SIPs for 25 years terrifically outgrows investing double the amount for half the timespan. Let time work its money magic!

4. Build Wealth on Auto-Pilot  

Once you set up your monthly SIP instalment, the entire investment process gets automated. SIP instalments get deducted, fund houses allocate units to your account, funds are invested across instruments and market cycles taken care of - all without any further action from your side!

5. Flexibility to Customize  

Mutual funds offer various categories - equity, debt, hybrid, etc. based on market risk and returns. Evaluate your risk appetite and financial goal timelines to decide allocation between them to create your own mutual fund portfolio.

Within your investment budget too, invest amounts convenient to you. Increase monthly SIPs amounts as cash flows permit. Pause or stop temporarily during exigencies without penalties. 

6. Tax-Efficient 

Equity funds provide indexation and grandfathering benefits to drastically reduce long term capital gain taxes if held over 12 months before redeeming. No tax hassles every year despite capital gains made when sell stocks or bonds.


Simpler and less risky than directly buying individual stocks, SIPs help create long term wealth systematically. Stay invested for 7-10 year horizons and mitigate performance anxiety or panic selling risks due to market swings.