A systematic investment plan (SIP) is a plan in which investors make regular, equal payments into a mutual fund, trading account, or retirement account such as a 401(k). SIPs allow investors to save regularly with a smaller amount of money while benefiting from the long-term advantages of dollar-cost averaging (DCA). By using a DCA strategy, an investor buys an investment using periodic equal transfers of funds to build wealth or a portfolio over time slowly.

KEY TAKEAWAYS:-

• A systematic investment plan involves investing a consistent sum of money regularly, and usually into the same security.
• A SIP generally pulls automatic withdrawals from the funding account and may require extended commitments from the investor.
• SIPs operate on the principle of dollar-cost averaging.
• Most brokerages and mutual fund companies offer SIPs.