A SIP or a Systematic Investment Plan is one of the smartest and easiest ways to invest money in the stock market via mutual funds. This is a mode of investment that can help you generate wealth, by investing small amounts of money (even as small as Rs. 500) at specific intervals over a period of time.
Few benefits of SIP are as follows:
1. As a common person, one does not have the professional skills, ability, and understanding to invest in the market. Mutual funds are managed by professional managers and through SIP one can get a professional investment done.
2. Mutual funds invest in a gamut of investment options from equity, Government bonds, to Gold. This diversification reduces the risk and through SIP one can invest in a diversified portfolio with a small money.
3. With limited funds, diversification becomes impossible, but through SIP one can easily invest in a diversified portfolio of the Mutual fund. SIP can be started with limited funds with a small amount at a regular interval
4. SIP invests regularly at the market without timing the market and thus being unaffected from market fluctuation if invested for a long time.
5. In a longer-run, SIP creates wealth as it accumulates the units with every investment installments.