Systematic Investment Plans (SIPs) have gained immense popularity among investors today. Mutual fund SIP investments in November remained above Rs 25,000 crore for the second consecutive month, AMFI data on month-wise SIP contributions showed. SIPs offer numerous advantages that appeal to both novice and seasoned investors.
With SIPs, you can invest in mutual funds while significantly reducing the risks associated with market fluctuations. Moreover, you can start investing in SIPs with an amount as small as Rs 500. Let’s explore the five major benefits of SIP:
Higher returns with SIP
SIPs offer better returns compared to many traditional investment schemes. You can start investing with a small amount and gradually increase it as your income grows. Additionally, SIPs provide the flexibility to continue investments at your convenience.
Flexible investment schedule
SIPs allow you to invest on a monthly, quarterly, or half-yearly basis. In the event of a financial crisis, you also have the option to pause your investments temporarily. This flexibility makes SIPs an attractive and convenient investment choice.
Power of compounding
SIPs leverage the power of compounding, meaning you earn returns not only on your principal investment but also on the returns generated over time. With an average return of up to 12% — sometimes even higher — SIPs provide an excellent opportunity to build substantial wealth in the long term.
Encourages savings and financial discipline
SIPs promote the habit of regular savings and financial discipline. By setting aside a fixed amount for investment every month, quarter, or half-year, you develop a disciplined approach to managing your finances and expenses.
Rupee-cost averaging advantage
SIPs help mitigate market risks through rupee cost averaging.
When the market falls, you purchase more units.
When the market rises, fewer units are bought.
This strategy ensures you aren’t adversely affected by market fluctuations. Over time, as the market improves, your average investment benefits from better returns.
SIPs have consistently proven to be an effective tool for building long-term wealth. In 2025, here are five practical ways to set up SIPs smartly and maximise their potential, as suggested by Rajani Tandale, Senior Vice President, Mutual Fund at 1 Finance.
Also read: Is your mutual fund overlapping putting your investments at risk? How to identify and avoid it!
5 practical ways to set up SIPs:
Start with right SIP amount
A calculated approach to determining your SIP amount is essential. Instead of an arbitrary figure, conduct a thorough analysis of your income, expenses, and financial goals. As Rajani Tandale points out, “SIP provides better returns than other schemes. You can start investing in it with a small amount and increase this amount as your income increases. SIP provides you flexibility, so that you can continue it as per your convenience.”
Step up your SIP annually
With rising incomes, it’s wise to increase your SIP investments proportionally. Opt for a Step-Up SIP, which allows automatic annual increments, ensuring your portfolio grows in tandem with your financial capacity.
Choose direct SIPs
Direct SIPs offer better returns and lower expense ratios by eliminating commission-based intermediaries. They are an excellent way to avoid biased advice and keep costs under control.
Limit number of schemes
Over-diversification can dilute returns and create portfolio overlap. Stick to a few high-quality schemes with guidance from an advisor. “Through SIP, you learn regular savings and financial discipline. In this, you keep aside an amount for investment every month, quarter or half-yearly basis, which brings discipline in your expenses,” says Tandale.
Avoid frequent churning and stay invested for long term
Patience is key to maximizing SIP returns. As Tandale emphasizes, “By investing regularly in SIP, you get the benefit of rupee cost averaging. When the market falls, you get more units. When the market rises, the number of units is reduced. This does not cause you loss despite market fluctuations. When the market rises, you get an opportunity to get better returns on your average investment.”
By starting with the right amount, stepping up investments annually, and maintaining a disciplined approach, 2025 can be the year to unlock your financial potential. SIPs are not just an investment tool — they are a pathway to achieving your long-term wealth-building goals.