Often, systematic investment plans (SIPs) are criticised for the slow pace at which they add to one's wealth. SIPs are a 'slow and steady' story to win in the long term. When the markets slumped from 21K to 7.7K levels, the lumpsum investors pumped in at its peak saw a greater part of their investments in the red.
An investor who continued to invest undeterred even during such turbulent times is all smiles now, for investments made during the 7.7K-10K range are already yielding huge profits.
SIP-ing your way to wealth
SIPs are essentially a longterm story -- one should not be looking at equity if the investment time frame is less than 3-5 years. An SIP is often misunderstood as an investment avenue by itself. Actually, it is only a mode of investment, ideal to invest in equities given its inherent volatility.
An SIP is a replica of the cost averaging theory that we studied in high school. The objective of using SIPs is to buy less units at market peaks and lower at market troughs. Here is an example of how patience pays over a 5 year timeframe:
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