1) Power of compounding:- Compounding occurs when the returns you earn on your investments start earning returns. This is a simple concept in theory. But its practical implications are substantial. When you invest regularly through SIPs, your returns get reinvested. Over time, this result in a snowball-effect, that may increase your potential returns manifold. An ideal way to maximise this gain is to invest for an extended period. This also means you may benefit by investing as early as possible. Even a ten-year head-start can have a major impact on your returns. Here’s an example to illustrate the point. Imagine there are four investors: Varun, Gita, Henry and Mira. Varun - 20 years Gita - 30 years Henry - 40 years and Mira - 50 years All of them invest Rs. 2,000 per month in an equity fund through SIPs. Assuming the equity fund offers an annual return of 12%, here’s how much each one could earn by the time they turn 60: Monthly SIP (Rs.) No. of years Investment amount (Rs.) Wealth gain (Rs.) Final corpus (Rs.)
Varun 2000 40 9.6 lakh 2.3 crore 2.4 crores
Gita 2000 30 7.2 lakh 63.4 lakh 70.6 lakhs
Henry 2000 20 4.8 lakh 15.2 lakh 20 lakhs
Mira 2000 10 2.4 lakh 2.2 lakh 4.6 lakhs
The table shown above is for illustration and understanding purpose only
This table clearly shows the exponential nature of SIP returns. Here, Henry's overall investment (Rs. 4.8 lakh) is exactly half of Varun’s investment (Rs. 9.6 lakh). However, his wealth creation is way behind that of Varun’s. Therefore, the earlier you start investing, the higher chance that you could grow your final corpus.

2) Low initial investment You can invest in mutual funds through a SIP with just Rs. 500 per month. This can be an affordable way to invest each month without hurting your wallet. You can increase your monthly investment amount with a rise in your income via SIP step-up feature. Mutual fund houses allow investors to top up their SIPs on a regular basis. So, even if you start with Rs. 500 or Rs. 1,000 every month, you can invest more over the years. This strategy can help you reach your investment goals at a faster rate.

3) Rupee cost averaging Rupee cost averaging is a concept where you purchase more units when the Net Asset Value (NAV) of the fund is low, and lesser units when the NAV is high. Essentially, it averages out your purchasing costs over the tenure of the investment period. You don’t need to worry about how to time the market when you invest through a SIP.

4) Convenience SIP can be a convenient mode of investing. Like most investors, you may not have the time for extensive market research and analysis to adjust or balance your portfolio. So, once you pick a good fund, you can give standing instructions to the bank and let the SIP take care of your monthly investments.

1.Risk associated with market activities "mutual funds are subject to market risks" – you'll always find this one-liner in every mutual fund/sip advertisement. even the slightest fluctuation in the market affects the net asset value (sip's market value), resulting in investors' loss. a good performing market signifies profits and vice versa.
several factors affect the market situation, such as interest rate fluctuation, natural disaster, recession, inflation, political activities, and others. portfolio diversification isn't an ideal solution to mitigate market or systematic risks. the best way is to be patient and wait for the market to become stable. plus, always use the sip calculator before investing your money in a scheme.

2. risk of liquidity an asset's liquidity risk is the difficulty level of redeeming an investment but with no losses on the investment value. generally, trouble occurs where sellers cannot find security buyers. hence, it becomes difficult for the sellers to redeem the investment money to the investors.
liquidity risk also prevails in the schemes with the provision of a lock-in period. portfolio diversification is the best solution to deal with such risk factors. also, investors should be diligent when selecting the plans. use the sip return calculator to ensure safe investment.

3. interest rate change risk interest rate fluctuation might affect the investor's sip profit. growth in the economy means a high-interest rate, and downturns mean a fall in the rates. know that rate of interest and the price of the bond go in the opposite direction. higher interest rates mean lesser bond value. therefore, it is best to check the plan's past performance, current interest rates, and market situation to determine its value.