What is Systematic about Systematic Investment Plan (SIP) and who invented it ?

Even if we invest in real estate, or recurring deposit, we do it systematically; Why is only SIP considered systematic ?

I am asking "who invented it" because (A) if it is a copyrighted term (or a trademark) owned by a company, which has later come into general use, then "systematic" need not mean anything ; whereas (B) if the financial industry bodies came up with that term, then either (B1) it has valid meaning in financial jargon or (B2) it was intended to be an "attractive" word.

EG for case (A) : WiFi does not mean anything, it is simply a copyrighted word or trademark.

EG for case (B2) : I have seen advertisements targeting Naive people with money, to invest in SIP, which is, after all, "systematic", and investor has to simply follow "step 1, step 2, step 3, step 4" to make money; I wonder if "systematic" was used to associate with "steps".
It says here ( http://www.businesstoday.in/buzztop/buzztop-personal-finance/dont-miss-out-on-the-sip-wave-here-are-5-top-performing-funds-you-can-start-systematic-investment-plans-in/story/252539.html ) that :
"Systematic Investment Plans (SIPs) is just a disciplined way of investing in mutual funds . . . . Cashing in on the SIP wave, here are the top 5 mutual funds from the large cap and mid cap category according to Value Research that assure high returns", with my emphasis on disciplined and assure.

Only case (B1) is left out, and I am asking this question here, for financial experts to share the real meaning of SIP or "Systematic", in financial jargon.

  • 1
    I'm not sure exactly what you're asking. You're asking for a definition and who coined the term, but I don't see how that helps you. It's systematic because it is a system of adding smaller amount periodically instead of a lump sum. It'a basically the same as "recurring deposit". How can you buy real estate in small quantities periodically?
    – D Stanley
    Commented May 22, 2017 at 13:20
  • @DStanley , I thought that "Systematic" was just a term used to lure investors, but wanted to know if that word really had a valid meaning in SIP which would Differentiate it with other (non-systematic?) methods of investing. Answer below, says that it is "nothing but a fancy term" ! Naive Investors may not see that it is similar to Recurring Deposit [ Regarding Real Estate : Does "systematic" always mean adding small amounts periodically ? No, I would say that analysing the market, comparing properties, selecting a property, bargaining are all parts of a "systematic" method of investing ]
    – Prem
    Commented May 22, 2017 at 14:51
  • that's one context for "systematic". In the context of "Systematic Investment Plan" it means investing in small amounts periodically, which is roughly the same as dollar cost averaging.
    – D Stanley
    Commented May 22, 2017 at 14:54
  • @DStanley , agreed about one context ; I have seen certain SIP advertisements where it shows things like : step 1 "select this" step 2 "select that" step 3 "enroll here" step 4 "make payment", forming an association between "steps" and "systematic". there is also the implied loose association that "systematic" means "guaranteed" returns, which is not really true.
    – Prem
    Commented May 22, 2017 at 15:05
  • Where do you see that SIPs "guarantee returns"? That's either misleading or incorrect (or both).
    – D Stanley
    Commented May 22, 2017 at 15:43

2 Answers 2


According to https://en.wikipedia.org/wiki/Systematic_Investment_Plan it's nothing but a fancy term for plain old dollar cost averaging.


Personally, I think you are approaching this from the wrong angle. You're somewhat correct in assuming that what you're reading is usually some kind of marketing material. Systematic Investment Plan (SIP) is not a universal piece of jargon in the financial world. Dollar cost averaging is a pretty universal piece of jargon in the financial world and is a common topic taught in finance classes in the US.

On average, verified by many studies, individuals will generate better investment returns when they proactively avoid timing the market or attempting to pick specific winners. Say you decide to invest in a mutual fund, dollar cost averaging means you invest the same dollar amount in consistent intervals rather than buying a number of shares or buying sporadically when you feel the market is low. As an example I'll compare investing $50 per week on Wednesdays, versus 1 share per week on Wednesdays, or the full $850 on the first Wednesday. I'll use the Vanguard Large cap fund as an example (VLCAX). I realize this is not really an apples to apples comparison as the invested amounts are different, I just wanted to show how your rate of return can change depending on how your money goes in to the market even if the difference is subtle.

                       Invest $50            Invest 1 Share         $850 at Once
     Date   Price   Shares  Investment  |   Shares  Investment  |    Shares
1/4/2017    52.41   0.9538     50.00    |     1      52.41      |     16.2152
1/11/2017   52.56   0.9513     50.00    |     1      52.56      |
1/18/2017   52.50   0.9524     50.00    |     1      52.50      |
1/25/2017   53.13   0.9411     50.00    |     1      53.13      |    
2/1/2017    52.72   0.9484     50.00    |     1      52.72      |    
2/8/2017    53.11   0.9413     50.00    |     1      53.11      |    
2/15/2017   54.41   0.9188     50.00    |     1      54.41      |    
2/22/2017   54.75   0.9132     50.00    |     1      54.75      |    
3/1/2017    55.52   0.9004     50.00    |     1      55.52      |    
3/8/2017    54.79   0.9126     50.00    |     1      54.79      |    
3/15/2017   55.33   0.9037     50.00    |     1      55.33      |    
3/22/2017   54.48   0.9178     50.00    |     1      54.48      |    
3/29/2017   54.54   0.9166     50.00    |     1      54.54      |    
4/5/2017    54.36   0.9196     50.00    |     1      54.36      |    
4/12/2017   54.22   0.9222     50.00    |     1      54.22      |    
4/19/2017   54.09   0.9242     50.00    |     1      54.09      |    
4/26/2017   55.25   0.905      50.00    |     1      55.25      | 
                                        |                       |
    Total          15.7424    850.00    |    17     918.23      |    16.2152   

    Account Value             869.76                939.25          895.89

    Return                      2.33%                 2.29%           5.39%

    Annualized Return           6.98%                 6.86%          16.19%

    Average Share Price        53.99                 54.01           52.42

By investing a common dollar amount rather than a common share amount you ultimately maintain a lower average share price while the share price climbs. It also keeps your investment easy to budget.

Vanguard published an excellent paper discussing dollar cost averaging versus lump sum investing which concluded that you should invest as soon as you have funds, rather than parsing out a lump sum in to smaller periodic investments, which is illustrated in the third column above; and obviously worked out well as the market has been increasing.

Ultimately, all of these companies are vying to customers so they all have marketing teams trying to figure out how to make their services sound interesting and unique. If they all called dollar cost averaging, "dollar cost averaging" none of them would appear to be unique. So they devise neat acronyms but it's all pretty much the same idea. Trickle your money in to your investments as the money becomes available to you.

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