Different asset classes behave differently at any point of time. It is very difficult for an individual to make investments into the best performing asset class at the right time and sell them at the best times. This is because one does not have the time and the resources to monitor investments on a continuous basis. Instead by opting for the Systematic Investment Plan an individual is in a position to build wealth over a long term.

Meaning of Systematic Investment Plan (SIP)
Systematic Investment Plan is a tool of regularly investing a fixed sum of money into specified asset class, which grows at a compounded rate. This enables an investor to create wealth in a disciplined manner over the long term.
The key to building wealth is to start investing early and regularly. These regular amounts however small, can grow into a substantial amount in the long term, thereby creating wealth for the investor. Thus Systematic Investment Plan is essentially disciplined approach to investing.

Advantages of SIP
Systematic Investment Plan offers the following advantages:
• Rupee Cost Averaging
• Compounding Power
• Convenience

Rupee Cost Averaging
Rupee Cost Averaging is essentially a mechanism that eliminates the need for an individual to time his investments. Rupee Cost Averaging works on the principle that more units are allotted when the prices are high and less units are allotted when the prices are low. This principle ensures that one is able to even out the ups and downs of market (volatility) and reduce one's average cost per unit.
Let us illustrate this concept with an example:
Suppose an individual opts for SIP by investing Rs 1000 in an open ended equity scheme with an initial NAV of Rs. 10. The following table highlights the number of units that will be allotted and the average purchase price, average cost per unit under different market scenarios.
The above table clearly shows that the average cost per unit will always be less than the average purchase price per unit irrespective of the market behavior i.e. rising market, falling market or volatile market.

Compounding Power
Second major advantage of SIP is by investing a regular sum every month and starting early one is able to build a substantial wealth over the long term due to compounding power. Suppose an individual Mr. X aged 25 saves Rs. 10,000 per annum for 35 years and invests them in assets such that it earns 9.5% compounded interest. On the other hand Mr. Y begins saving at age 30 and saves similar amount (Rs. 10,000 p.a.) for the next 30 years earning the same return (9.5% compounded). At the end of 60 years Mr. X who has invested Rs. 3.5 lakhs gets about Rs. 25.33 lakhs, while Mr. Y who total investment is Rs. 3 lakhs gets Rs. 15.72 lakhs. Thus one sees how big a difference compounding makes if one starts investing when one is 25 yrs against 30 years of age. Thus definitely one benefits by investing early and regularly in life.

Convenience
By opting for the SIP option (issuing post dated cheques of periodic investments on monthly or quarterly basis) as per one's investment need; one does not have to take time and effort to monitor investment process. Thus the automatic investment mechanism of SIP gives investor the convenience of making investments in a hassle free manner.

Conclusion
Thus the key to building wealth over the long term is investing regularly and early. Thus SIP ensures that investors can build wealth over the long term and achieve their long term investment goals. By offering SIP facility Mutual Funds play an important role to enable an investor meet his financial objectives.