Take SIP route for better long-term returns
A systematic investment plan (SIP) is an investment option that involves investments on a systematic basis over a period of time. Under a SIP option, an investor commits making a regular investment in a particular mutual fund or deposit. Investing in mutual funds through this route is much easier, more efficient, and is one of the best ways to see your investments grow over time.
In a SIP, the investor invests a specific amount of money for a continuous period, at regular intervals. By doing this, you can compulsorily save a fixed amount each month. Further, you can avail the advantage of rupee cost averaging. This is because you automatically participate in the market swings. The amount of investment remaining the same, you buy more units in a declining market and less in a rising market.
By consistently investing the same amount at regular intervals, your average cost per unit will be lower than the average market price, irrespective of whether the market is rising, falling or fluctuating. The advantage of rupee cost averaging is that the net asset value (NAV) is averaged out, as you will be entering the fund at different NAVs, which may be higher or lower depending on the market condition. As such, the returns are enhanced under the SIP schemes.
When you invest the same amount in a fund at regular intervals over time, you buy more units when the price is lower. You reduce your average cost per share over time. Thus, rupee cost averaging helps make market fluctuations work for you, and reduces the risk when you invest all your money just before a market downturn.
Rupee cost averaging offers its greatest benefit with investments that tend to regularly fluctuate in price. So SIPs can be especially effective while buying equity funds. The NAVs of these funds can vary widely. However, rupee cost averaging may not work well if the market rises continuously.
SIP options
The SIP option is available with all types of funds like equity, income or gilt. SIP is a long-term investment plan. You need to set aside some amount of money every month for investing in a fund like a diversified equity fund or balanced fund. You have to give post-dated cheques to the fund house. You can invest a higher amount also in some cases.
You can change a SIP structure only in the multiples of the SIP amount. In case you are investing in two different schemes of the same fund, you can fill in a common SIP form for all the schemes.
SIP offers more flexibility and helps identify funds that suit your risk-return profile. In case of SIPs, the asset allocation keeps pace with the investor's changing risk return profile. Besides, investing this way offers instant liquidity whenever required. An investor who is not having a lump-sum amount to invest and also does not want to take much risk on his investments should always select a SIP option. This will enable him to invest regularly and improve investing discipline.
Because it's systematic, a SIP ensures you plan for your long-term goals along with the short-term ones. It is a disciplined investment plan and helps reduce your susceptibility to market fluctuations. It is a powerful tool that helps preserve capital and also creates wealth in the long run.
These are ideally suited for investors who wish to sail smoothly in turbulent times. The investor is at a liberty to enter or exit from the scheme whenever he wishes to, depending on the market conditions. He can redeem his units any time irrespective of whether he has completed his minimum investment in that scheme.
A systematic investment plan (SIP) is an investment option that involves investments on a systematic basis over a period of time. Under a SIP option, an investor commits making a regular investment in a particular mutual fund or deposit. Investing in mutual funds through this route is much easier, more efficient, and is one of the best ways to see your investments grow over time.
In a SIP, the investor invests a specific amount of money for a continuous period, at regular intervals. By doing this, you can compulsorily save a fixed amount each month. Further, you can avail the advantage of rupee cost averaging. This is because you automatically participate in the market swings. The amount of investment remaining the same, you buy more units in a declining market and less in a rising market.
By consistently investing the same amount at regular intervals, your average cost per unit will be lower than the average market price, irrespective of whether the market is rising, falling or fluctuating. The advantage of rupee cost averaging is that the net asset value (NAV) is averaged out, as you will be entering the fund at different NAVs, which may be higher or lower depending on the market condition. As such, the returns are enhanced under the SIP schemes.
When you invest the same amount in a fund at regular intervals over time, you buy more units when the price is lower. You reduce your average cost per share over time. Thus, rupee cost averaging helps make market fluctuations work for you, and reduces the risk when you invest all your money just before a market downturn.
Rupee cost averaging offers its greatest benefit with investments that tend to regularly fluctuate in price. So SIPs can be especially effective while buying equity funds. The NAVs of these funds can vary widely. However, rupee cost averaging may not work well if the market rises continuously.
SIP options
The SIP option is available with all types of funds like equity, income or gilt. SIP is a long-term investment plan. You need to set aside some amount of money every month for investing in a fund like a diversified equity fund or balanced fund. You have to give post-dated cheques to the fund house. You can invest a higher amount also in some cases.
You can change a SIP structure only in the multiples of the SIP amount. In case you are investing in two different schemes of the same fund, you can fill in a common SIP form for all the schemes.
SIP offers more flexibility and helps identify funds that suit your risk-return profile. In case of SIPs, the asset allocation keeps pace with the investor's changing risk return profile. Besides, investing this way offers instant liquidity whenever required. An investor who is not having a lump-sum amount to invest and also does not want to take much risk on his investments should always select a SIP option. This will enable him to invest regularly and improve investing discipline.
Because it's systematic, a SIP ensures you plan for your long-term goals along with the short-term ones. It is a disciplined investment plan and helps reduce your susceptibility to market fluctuations. It is a powerful tool that helps preserve capital and also creates wealth in the long run.
These are ideally suited for investors who wish to sail smoothly in turbulent times. The investor is at a liberty to enter or exit from the scheme whenever he wishes to, depending on the market conditions. He can redeem his units any time irrespective of whether he has completed his minimum investment in that scheme.
