Among all the financial instruments available in the market today, Systematic Investment Plan or SIP is one the smartest way to invest and plan your finances. As a financial planning tool, the SIP investment allows you to invest in the Mutual Funds in a convenient and hassle-free manner. The process of the SIP investment is planned, which entails investing a certain amount of money every month.

The SIP investment also gives you higher returns as compared to other financial instruments, which makes it a great investment option to look at. Below we list down five such reasons that you need to know about SIP investment.

  • Finance plans:

The SIP investment works well for long-term goals such as children’s education or retirement planning or even buying your dream home, someday. We all know that all these things need huge financial backings, while it is a task to cough up such huge sum at one time, this investments helps you save for it in a slow, yet steady manner.

However, this does not mean that your money is locked away forever. The best part of the SIP investment is that you can opt for the no lock-in period and access your finances as an when you require them.

  • Disciplined investing:

Another great thing about investing in SIPs is that it disciplines the investor to invest a specific amount, at regular intervals. Plus, the SIP investments aren’t necessarily huge, you can commence the investment with the necessary amount of Rs. 500 to Rs. 1000 per month.

In the recent past, some of the SIP investments have further lowered their investment entry to Rs. 100 per month to help people with the lower income group to invest and save too.

  • Diversification:

One of the benefits of investing in SIP is that you get an option to diversify your portfolio with an array of funds available. Also, you can invest in Mutual Funds through SIP. Experts of this financial instrument have always vouched for an investment that contains one blue-chip stock and diversifies them across a minimum of 8 -10 sectors. This way, the investor may face market fluctuations but, the effect will not result in a noticeable loss of finances, as the risk is spread out and you can fetch the best of each investment made.

  • Minimum risks:

With the option of diversification, the SIP investment makes your finances less prone to market risks. The periodic investment in the equities through equity mutual funds allows you to sail through the ups and downs of equities smoothly. The mechanics of this investment is simple – when the market goes up, you earn fewer returns while when the market falls, and you tend to receive more units. However, you continue to make the periodic investment irrespective of the market fluctuations.

  • Ideal for young investors:

The SIP investments primarily work on the rule of compounding, with is the most significant advantage of it. Hence, it makes sense to start the SIP invest at the earliest. Plus, even if your investment is minimal or small, by the law of compounding, it gives you an excellent advantage for wealth creation in the future.

All you have to do is choose the right mutual funds and SIP investment that suits your future goals.