SIP vs FD: Diversify Your Portfolio

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In India, there are many options to invest and you make investments to make your money work for you. It may be difficult to decide where to invest but diversifying your portfolio is equally important. Diversification helps to spread your investment across different asset classes which helps to reduce the risk of market volatility.

Diversification helps you to tap into different investment opportunities and you can benefit from the different market conditions. The different options for diversification available are Systematic Investment Plan (SIP) and Fixed Deposits (FD). Each of the investment avenues comes with its set of advantages and disadvantages. You should understand how an option can benefit you.

SIP

• SIP offers a simple and disciplined way to invest in mutual funds. It allows you to invest a fixed amount of money regularly (monthly or quarterly) in mutual funds of your choice. The benefits offered are as follows:
• When you invest with SIP you do not have to worry about timing the market. As you invest a fixed amount you can buy more units when the prices are low and fewer units when the prices are high. This helps to average out the cost and reduces the impact of market volatility.
• SIP offers you the benefits of the power of compounding when you invest for the long term. Compounding allows you to reinvest your dividends and capital giants which help to grow your wealth exponentially.
• SIP offers flexibility, you can start with small amounts and you can increase the amount as your income grows. SIP offers the option to automate your investments thus making the process hassle-free.

FD

• FDs have been popular with conservative investors who are looking for stability and assured returns. The benefits offered are as follows:
• FDs offer a fixed rate of interest for a specified period. This helps you to know how much you will earn on your investments. It is a safer option for your hard-earned money.
• FDs safeguard your principal amount and provide capital preservation. This makes them an ideal choice for risk-averse individuals, You can plan your financial goals with certainty.
• FDs can also be a source of regular income and you can get income monthly, quarterly or annually depending on your needs. This can be useful for retirement or when you need a fixed income stream.

Appreciate offers an online trading app that helps you to invest in mutual funds online. It provides automated SIP to help you achieve your goals.
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