Why Systematic Investment Plans (SIPs) Are the Secret Weapon for Nepalese- And Why Everyone is Sleeping on Them

While everyone in Nepal is busy chasing quick-rich schemes, underestimating the one with real potential that could transform their financial future i.e. SIP. SIP can be considered as the hero of the wealth creation in the long term. It is not just for the wealthy or financially sound people, but also for those who want to build wealth through one small step at a time.

What exactly is an SIP?

SIP (Systematic Investment Plan) in a simple sense is one of the options for investing money regularly. It offers flexibility, allowing investors to purchase and sell units anytime. The money is auto-debited from the investor's bank account or the investor can directly pay each amount through digital wallets and is invested in a specific open-ended mutual fund scheme. The investor is allocated a certain number of units based on the ongoing market rate (called NAV or net asset value) for the day. Every time an investor invests money, additional units of the scheme are purchased at the market rate and added to the investor's account. It is one of the best platforms for long-term savers who wish to have a lump sum in the future, either as a retirement fund, seed money for business, children's education, and many more. SIPs are managed by merchant banking, which operates under the oversight of SEBON (Securities Board of Nepal) and a Trustee to ensure compliance and investor protection.

            So, the plan of investing the same amount of money every month over an extended period regardless of the growth and downfall of the market is known as SIP. One can grab the benefit of rupee-cost averaging and compounding through it.

Why are SIPs a game-changer for Nepalese investors?

• Affordability: Unlike lump sum investing, SIP allows one to invest a small sum of money with as little as Rs.1000 per month. Also, the investors can increase their contribution as their salary increases. This makes it an ideal option for young professionals, small business owners, and salaried individuals.
• Discipline: Inconsistent saving is one of the major financial challenges that many families face in Nepal. SIPs solve this issue by automating investments, making sure saving becomes a habit rather than something done after everything else.
• Rupee-cost averaging: Rupee-cost averaging is an investing strategy, where you invest a fixed amount regularly regardless of the volatility of the market. This lowers the average cost of investment over time.

Let's say, you decide to invest Rs. 1000 every month in SIP. The market price of SIP i.e. NAV keeps changing each month according to the change in the stock market. Due to this, when the price is lowered, you buy more units and vice versa. This averages the total units purchased and acts as a great way to reduce the impact of market ups and downs on your investments and eventually reduce the cost of your investment.

• Power of compounding: Compounding is an effect where your money earns returns and is accumulated as a principal to earn more and more from it. In other words, you earn returns not just on your initial investment but also on the returns that accumulate over time. Whenever the company in which you hold SIP distributes a dividend, it is reinvested automatically.

So, Why Is SIP Still Underrated in Nepal?

• Lack of awareness: Although financial literacy is gradually increasing day by day SIP still remains a mystery among many literate Nepalese. They are unaware of how SIP works and how it is beneficial.
• Misconceptions about risk: Many believe that mutual funds are too risky to invest. They don't know that SIP actually reduces risk by spreading investment over time and protecting investors from market fluctuations.
• Preference for traditional investment: People prefer to invest in gold, real estate, and fixed deposits. These assets have merits too but they are not flexible and liquidable. But due to their high exposure people think that they are safer move than SIP.

SIPs Are Growing, Don't Get Left Behind

Despite all these, the good news is that SIPs are gaining momentum at the current time. People are becoming aware of it. Young Nepalese are increasingly turning to online platforms, social media, and financial advisors to educate themselves about investing. With the middle class expanding, the demand for smarter, more accessible investment options is growing like never before. Many assets management companies are introducing this plan and constantly trying to literate people about SIP through strategic CSR activities. Currently, there are seven open-ended mutual funds in Nepal in which funds are collected through SIP.

 Here's a quick look at them:

Your future self will thank you!

Imagine this: You’re 25 years old, just starting your career, and dreaming of a future where money isn’t a constant worry. You decide to invest NPR 5,000 every month in a Systematic Investment Plan (SIP). At first, it feels like a small step, just a fraction of your salary. But over the years, something magical happens. Your money starts growing, not just because of your contributions, but because of compounding. By the time you’re 50, that NPR 5,000 a month has grown into a substantial nest egg.

But here’s the best part: SIPs aren’t just about building wealth rather they’re about securing your freedom; freedom to retire comfortably, freedom to pursue your passions, and freedom to live life on your terms. And when the time comes to enjoy the fruits of your labor, Systematic Withdrawal Plans (SWPs) step in. SWPs allow you to withdraw a fixed amount regularly, whether it’s for monthly expenses, a dream vacation, or helping your kids with their education while keeping your investments intact.

Think of it like planting a tree. Your SIP is the seed you nurture over the years, and the SWP is the fruit you enjoy once the tree has grown. Countries like India have already embraced SWPs, and Nepal is catching up. As more people understand the power of disciplined investing, SWPs will soon become a reality here too.

Whether you’re a young professional, a freelancer, or someone planning for retirement, the time to start is now. Because every rupee you invest today is a step toward a future where you’re not just wealthy, but truly free.

The best time to start was yesterday. The second-best time? Today. Don’t wait until it’s too late. Take the first step towards financial freedom, start your SIP now.

Article By: Nisha Ghimire