| Systematic Investment Plans |
Indian
Market is a synonym for volatility and dynamism. National Stock Exchange is the most
liquid exchange in the world. Predicting Indian Market is the most difficult task, almost
an impossible one. You forecast something, but, on most occasions end up with something
quite opposite to what you have predicted.
Markets in India still continue to be driven by sentiment, rather than the underlying
fundamentals. When Microsoft was put on trial in the US, the markets here tumbled. Now,
when the US election results are being delayed, our markets here remain rangebound or
change marginally. Markets will take a turn depending on who will be the next President of
the US. When Nasdaq goes down, our Indian Jill comes tumbling after. Why should we take a
lead from Nasdaq when our software companies continue to give good results? Is it that the
Indian investors should always suffer from these gyrating markets? What is the strategy
for investors like you and me to sail smoothly in a storm? Past experiences have shown
that a disciplined investment plan holds the key to ride bulls and bears in the market.
One of the most convenient methods of investing in the stock markets is the Systematic
Investment Plan (SIP) offered by Mutual Funds. SIP is a powerful tool in India, with a
strategy of not only preserving capital but also translating into substantial creation of
wealth in the long run.
What are Systematic Investment Plans? Under this plan Investors invest a specific amount
for a continuous period, at regular intervals. By doing this, the investor has the
advantage of rupee cost averaging and also helps him save compulsorily save a fixed amount
each month. When you opt for SIP, you automatically participate in the market swings. Your
amount of investment remaining the same, you buy more number of units in a declining
market and less number of units in a rising market so that you do not panic in turbulent
market conditions. As said earlier, SIP results in rupee cost averaging, which means that,
when you invest consistently the same amount at regular intervals, your average cost per
unit will always remain lower than the average market price, irrespective of how the
market is - rising, falling or fluctuating. Where as this will not be true for a one-time
investment. An SIP investor gets phenomenal rate of return compared to a one-time
investor.
It is very easy to become a systematic investor. All you need to do is plan your savings
effectively and set aside some amount of money every month for investing in a fund -
ideally a diversified equity fund or balanced fund, since SIP is a long-term investment
plan. The procedure involved is also very simple. All you need to do is, give post dated
checks to the fund house. There is another advantage for the investor. He is at a liberty
to enter or exit from the scheme whenever he wishes to, depending on the market
conditions. So, if you want to stay calm and sail smoothly in turbulent times go for
Systematic Investment Plans.
S Suma
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