Investor Corner/Building and judging a portfolio/Portfolio Construction & Behaviour
3.1.5 SIP: Systematic Investment Plan
A Systematic Investment Plan, or SIP, invests a fixed amount at regular intervals, typically monthly. It enforces saving discipline and averages the purchase price of units over time.
Discipline built into the mechanism itself
A SIP automates the decision to invest, removing the need to consciously decide, and remember, to invest each month. This alone solves one of the most common reasons investing plans fail: simply forgetting, or repeatedly postponing, the decision to actually put money in.
How averaging actually works
Investing a fixed amount every month means buying more units when prices are low and fewer units when prices are high, without needing to consciously time either. Over a full market cycle including both ups and downs, this tends to produce a reasonable average purchase cost, without requiring the investor to correctly predict market direction.
What a SIP does not guarantee
A SIP does not protect against loss if the market falls and stays down over the investor's entire holding period; it only smooths the purchase price along the way. It is a discipline and averaging tool, not a guarantee of positive returns, and it works best when paired with a reasonably long time horizon that gives the averaging effect room to actually help.
How PriLytics helps. PriLytics automatically detects SIP, STP and SWP patterns across your transaction history and computes accurate XIRR that correctly reflects when each instalment actually happened. See how returns are calculated.