Systematic Investment Plans, or SIPs, have long been marketed as a way to average out market volatility. Many people think the key is to time the market, but that is not the biggest reason they work.
Veteran investor Deepak Shenoy says that SIPs are more about creating a disciplined investing habit than about picking the right moment to buy. A disciplined habit means you invest regularly, not just when the market looks good.
In a series of posts on X, the CEO of Capitalmind Mutual Fund explained that the real power of wealth creation through SIPs becomes clear in later years. When the portfolio grows, most of the increase comes from returns, not from the money you add each month.
The reason SIPs build wealth over time is the power of compounding. By investing small amounts every month, the returns on those investments keep earning returns, and the cycle repeats.
One reason people choose monthly SIPs is that most salaries are paid monthly. You earn, you spend, you save, you invest. That cycle happens every month, so a SIP fits naturally into your routine.
If you do not invest, the money you save is likely to be spent. SIPs force you to invest first and spend later. You end up spending only what is left after the investment, which helps you build wealth.
Shenoy also said that a lump‑sum investment can be fine. Some months you have more money and some you have less. In those months you can invest more, and in others you can hold back.
The growth from SIPs is most noticeable after a few years. In the early years, the money you put in builds the corpus. Later, the incremental savings are small compared to the corpus, so the returns become the main driver of growth.
Shenoy talks about three parts of wealth creation: save, grow and spend. First, save a little more every month. Second, let the money grow through returns. Third, spend wisely to improve your life.
SIPs are a tool to help you grow your wealth, but the final step is to use that wealth to make your life better. By keeping the habit of monthly investing, you give yourself a steady path to financial security.