What is the main purpose of systematic investment plans (SIPs)?

The primary purpose of systematic investment plans (SIPs) is to contribute a fixed amount regularly for disciplined savings. SIPs allow investors to invest a specific sum of money at regular intervals, typically monthly, into mutual funds or other investment vehicles. This approach encourages consistent savings and helps to build wealth over time, capitalizing on the benefits of dollar-cost averaging. By investing the same amount periodically, investors can purchase more units when prices are low and fewer units when prices are high, potentially reducing the overall cost per unit over time.

This method also instills a habit of saving and investing, making it more accessible for individuals to participate in the market without needing a large lump sum upfront. Given the volatility of markets, regular investments can mitigate the risks associated with market timing, allowing investors to focus on their long-term financial goals rather than short-term market fluctuations.

In contrast, other options focus on irregular contributions, avoiding certain investment types, or investing only once a year, which do not align with the structured, disciplined approach that SIPs offer.