How can you create a diversified portfolio with an SIP investment?

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In the world of mutual fund investments, a strategy that stands out for its simplicity and effectiveness is the Systematic Investment Plan (SIP). Investing in SIPs offer investors an opportunity to create a diversified portfolio with a relatively better return potential over the long term.

In this article, we will understand the art of creating a diversified portfolio using SIP investments, and why seeking the guidance of a financial advisor is vital to succeed in the financial markets.

  • Table of contents
  1. Understanding systematic investment plan (SIP)
  2. Diversification: The key to reducing risk
  3. Bajaj Finserv AMC
  4. FAQ

Understanding systematic investment plan (SIP)

Before we discuss the importance of a diversified portfolio, let's grasp the essence of SIPs.

An SIP is an investment approach that allows you to invest a fixed amount regularly, typically on a monthly basis, in mutual funds. SIPs bring discipline to your investment journey and are the ideal choice for both beginners and seasoned investors.

Moreover, SIPs promote the habit of regular saving and investing. By consistently investing a fixed amount, you can also reap the benefits of power of compounding, which can work wonders over time.

The SIP method offers several advantages:

Rupee-cost averaging : SIPs enable you to buy more units when the market is down and fewer units when it's up, thus averaging your purchase cost over time.

Compounding effect: Your money earns returns, which are reinvested. This leads to compounding and the longer you stay invested, the more substantial the effect becomes.

This means that the fund manager can decrease and increase exposure to equities as per the market conditions in order to capture potential gains and reduce the impact on capital invested.

Convenience: SIPs are hassle-free and can be tailored to your budget, making them accessible to a wide range of investors.

Now, let's move on to the crux of the matter— how to create a diversified portfolio with SIP investments…

Diversification: The key to reducing risk

Diversification is a fundamental strategy in the world of investments. It involves spreading one’s investments across various asset classes, sectors, and geographies. The primary aim is to reduce risk by not putting all your eggs in one basket.

Here's how you can achieve diversification through investing in SIPs:

Asset allocation: Asset allocation is the foundation of diversification. It involves distributing your investments across different asset classes like equity, debt, and hybrid funds. Equity funds have the potential for better returns but come with a relatively higher risk. Debt funds are comparatively stable and offer lower returns. Hybrid funds combine both equity and debt components. Thus, your allocation should align with your risk tolerance and financial goals.

Fund selection: Within each asset class, there are numerous mutual fund schemes to choose from. Avoid chasing the "best" fund, as it's impossible to predict future performance. Instead, opt for well-established funds with a reputed Asset Management Company.

Sector and theme diversification: Even within equity funds, diversify further by selecting funds from various sectors and themes. This can mitigate impact on the portfolio from the adverse effects of a downturn in a particular sector.

Risk profiling: Assess your risk tolerance objectively. If you are risk-averse, you can allocate a larger portion to debt or hybrid funds. If you can take more risk, consider leaning towards equity funds. Ultimately, your portfolio should reflect your comfort level with the risk exposure.

Constructing a diversified portfolio can be a complex task, especially if you are new to investing. Diversification is not a one-time task; it requires periodic review and adjustments as your financial situation evolves. Always keep in mind that while investing in SIPs can be a fantastic tool, consulting a financial advisor or distributor is a wise decision to navigate the intricate world of investments effectively. Building wealth is a journey, and with SIPs and diversification, you can create a sturdy foundation for a financially secure future.

Bajaj Finserv AMC

Bajaj Finserv AMC has launched schemes including a flexi-cap fund, liquid fund, overnight fund, arbitrage fund, and money market fund. Each of these investment options provides professional management, and potential for reasonable returns. However, it is important for investors to assess their investment objectives, risk tolerance, and consult a financial advisor before making any mutual fund investments.


In conclusion, SIP investments provide an avenue for potential wealth creation over long term through diversification. By strategically allocating your investments across asset classes, and sectors. You can achieve relatively reasonable returns with commensurate risk. Remember, the key to a successful diversified portfolio is not about chasing the “best” funds or predicting market trends but making informed choices that align with your financial objectives.


What is an SIP, and how does it help in diversifying a portfolio?
A Systematic Investment Plan (SIP) is a way to invest in mutual funds regularly. It aids diversification by allowing you to invest small amounts in a mix of mutual funds, including equity, debt, and hybrid, thereby spreading your risk across different asset classes.

Should I focus on equity, debt, or hybrid SIPs for diversification?
The choice depends on your risk tolerance and financial goals. Equity SIPs offer growth potential but come with relatively higher risk, while debt SIPs provide relative stability. Hybrid SIPs combine both. Diversification often involves a mix of these based on your investment objectives.

How frequently should I review and rebalance my SIP portfolio to maintain diversification
Regularly monitor your SIP diversified portfolio, at least annually. Rebalance if your asset allocation deviates significantly from your target. Keep in mind your financial goals and risk tolerance when making adjustments.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
This document should not be treated as endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.