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What Is a Systematic Investment Plan (SIP)?

A systematic investment plan (SIP) is a plan in which investors make regular, equal payments into a mutual fund, trading account, or retirement account such as a 401(k). SIPs allow investors to save regularly with a smaller amount of money while benefiting from the long-term advantages of dollar-cost averaging (DCA). By using a DCA strategy, an investor buys an investment using periodic equal transfers of funds to build wealth or a portfolio over time slowly.

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Key Takeaways


  • A systematic investment plan involves investing a consistent sum of money regularly, and usually into the same security.
  • A SIP generally pulls automatic withdrawals from the funding account and may require extended commitments from the investor.
  • SIPs operate on the principle of dollar-cost averaging.
  • Most brokerages and mutual fund companies offer SIPs.