Patience and discipline is what an SIP required in order to perform up to an investor's expectations.

Systematic Investment Plan or SIP could be a powerful tool to turn your financial goals into reality. But like every other investing tool SIP too comes with its own disclaimer. Patience and discipline is what an SIP required in order to perform up to an investor's expectations.

The following five tips are must-read in order to get the most out of your SIPs.

1) Stick To The Targeted Time Duration-

Most often people try to see the performance of their SIPs in relation with the market performance, which is not the right thing to do. By doing so, people are prompted to exit their SIPs during a bearish market, thereby, defeating the very purpose of an SIP, which is to fulfill a goal after a specific time-period. One forgets the cost averaging benefit of an SIP, which emerges as a winner if held through the entire market cycle.

2) Assign SIP To A Goal -

Our financial lives have so many goals right from planning to buy a home, car to child's education, overseas vacation and retirement planning. Fortunately, there is an easy way to take care of every goal if different SIPs are started for each specific goal. For example, Rs. 5,000 per month could be invested in an SIP for 3 years for buying a car around same time.

3) Increase SIP Amount Each Year -

It is not necessary that a Rs. 2,000 SIP should stay as it is throughout the specified time. One can adjust and step up SIP amount in accordance with increasing income and savings. Such periodical step-ups ensure that adjustment against inflation and rising lifestyle costs.

4) Convert Lumpsum Into SIP -

If you have a cash surplus lying in your bank account and you want to start an SIP right away then it is better to transfer the amount into a liquid fund. Parking lumpsum cash in liquid funds would fetch more returns than a bank account and an SIP could be started automatically through Systematic Transfer Plan (STP) into equity fund.

5) When Nearing Financial Goal -

Once an individual is nearing his/her financial goal then it is recommended to transfer the funds accumulated through SIP into a debt fund so as to protect fund against rapid market movements. For example, once your child has one year left to start his college education then, a SWP or STP could be signed up against SIP for this goal.