SIP as everyone knows is Systematic Investment Plan. Generally SIP relates to investing a fixed sum of money each month in mutual fund scheme. The rupee cost averaging and the power of compounding are two main advantages of SIP investments.
Rupee Cost averaging: If you wanted to buy units of a mutual fund you end up purchasing more units when the net asset values of the units are down, and vice versa. Here, it is the average purchase price that matters and not the purchase price of one unit as you will keep on purchasing each month on a particular date. The returns are based on this average cost. This way you average the cost of your purchase and sell the units in future to achieve your financial goal. This helps in negating the volatility in the markets.