As if the Power of Compounding wasn't enough, investing with the help of SIP's also offers you the additional benefit of Rupee Cost Averaging. Simply put- You buy more units at lower prices, and less units at higher prices, without having to track the market every day.
This is how SIP works; If the NAV in the first month is Rs 20, and you have invested Rs. 2000 you will get 100 units. Similarly in the next month if the NAV is Rs 25, you will get 80 units. The following month if the NAV is Rs 18, then you will get 111 units. So, after three months, you would have 291 units. This means that investing through SIP helped you pay a lesser price per unit! On an average, you would have paid around only Rs 20.61 per unit.
Starting a SIP in an equity mutual fund allows you to take advantage of investing in equities and also seek diversification. Investing through the SIP route minimizes the effects of investing in volatile markets.
With SIP's you don't even have to worry about when and where to invest or even track daily market movements, as there is a professional fund manager to take care of your investments.
Investing through a SIP significantly reduces the risks attached to market timing.
Source: Tata MF SIP Guide