Skip to main content

Power of compounding with systematic investing

 

   The Sensex has fallen by over 2500 points. The stock market wealth has come down by more than Rs 11 lakh crores since the beginning of 2011. On an average, Rs 100 crores is eroded every single minute of trade so far this year. Investor sentiment is down because of the continuous fall in the stock markets. The bear run at the stock markets is costing investors dearly.


   So what should you do?


   One option is go for a systematic investment plan (SIP). A SIP inculcates a disciplined approach to making regular investments in equity, and balanced and debt funds. Each transaction will fetch you additional units that will be added to your investment account, helping you build your investment at regular intervals.


   There is no need to time the markets as you invest at pre-determined intervals.

 

This spares you from investing a lump sum at peak prices. Also, you benefit from an investment principle called 'rupee cost averaging'. Since you invest fixed sums at regular intervals, you pick up more units when the prices are low and fewer units when the prices are high. This brings down the average cost of your units.

 
   SIP renders to you the power of compounding, especially if you begin your SIP early in life. Also, SIPs inculcate the savings habit in investors. On a regular basis, you put aside affordable sums of money. Over the long run, you could amass considerable wealth.


   SIP is a hassle-free mode of investment since you can issue standing instructions for the regular transfers of money into your SIPs. Moreover, a SIP serves as a good financial tool to counter inflation. They help meet large expenses like marriages, education or a house purchase. With SIP you don't need to invest a huge sum of money and can start with as little as Rs 500.


   SIPs reduce risk. In highly volatile markets, SIP helps you average out your cost by generating superior returns in the long run. It reduces the risk associated with lump sum investments. By buying into various NAV levels, your rupee costs get averaged. It goes without saying that the average NAVs at which you purchase may only go up in a rallying market, while in a declining phase, your average cost would come down. This is a prime reason why investors should keep their SIP going, in both the bull and bear phases of the market. This way they can optimise their returns.


   Market fluctuations affect cost of investments. SIP gives the investor the option to invest at various points in time which helps average out the cost of acquisition of units. A SIP enables you to invest a preset amount in the scheme of your choice at the applicable NAV of each transaction date. Most funds offer SIP in most of their schemes. You can just identify the amount and scheme you wish to invest in and then choose from options like auto debit and ECS. The amount will automatically get debited on a date of your choice. You can also give monthly/quarterly postdated cheques for the amount you wish to invest.

 

Popular posts from this blog

Retirement planning from a long-term perspective

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds     `HOW green was my valley'. This title comes from a movie I had watched many years ago. A little boy's journey into adulthood and the story of a Welsh valley's turn of-the-century descent from pristine paradise to despoiled coal mining.   I thought of the title because it is comparatively reflective of a person's life ­ the glorious years when he is earning and the sun down years when he is not having his regular job and, hence, his living standards comes down. The reason is a combination of things. Inflation of food items, transport, increase in health related costs in the later years of life and increase in expenses in almost all basic amenities of life. In India, the social security system is almost non-existent. In some states, wherever it is available, the scales of benefits are extremely modest...

LIC's JEEVAN SHIKHAR

  LIC's Jeevan Shikhar is a participating, non-linked, saving cum protection single premium plan wherein the risk cover is ten times of Tabular Single Premium. The proposer will have an option to choose the Maturity Sum Assured. The premium payable shall depend on the chosen amount of Maturity Sum Assured and age at entry of the life assured. This plan also takes care of liquidity need through its loan facility. The plan will be open for sale for a maximum period of 120 days from the date of launch. 1.   BENEFITS   : a) Death Benefit: On death during first five policy years: Before the date of commencement of risk   :   Refund of Single Premium without interest. Single Premium mentioned above shall not include any extra amount if charged under the policy due to underwriting decision and taxes. After the date of commencement of risk   : "Sum Assured on Death" equal to 10 times the tabular single premium shall be payable. On death after completion of five policy years but b...

CNX Midcap vs BNP Paribas Midcap Fund

BNP Paribas Midcap Fund - Invest Online   Te  performance of BNP Paribas Midcap Fund  – which has across the last 3 years generated superior returns over the benchmark – especially when the markets have gone down the fund has handsomely outperformed the benchmark preserving the capital of the investors. The fund has been able to do this only due to the superior stock selection process ( BMV approach) that is diligently followed at BNPP.   Highlights of BNP Paribas Mid Cap Fund:   Investment Objective : BNP Paribas Mid Cap Fund gives an investor exposure to invest in the various quality midcap stocks. The fund also has some exposure to large as well as small cap stocks.   Investment Approach : BMV ( Quality and scalability of Business →Good Management → Reasonable Valuation ) with Bottom-up stock picking.   Most of the investors are way happier if the fund that they have invested in is a significant Outperformer in tough times than in Good ti...

Investment Strategy - What is Sector Rotation Theory?

Buy Gold Mutual Funds Invest Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Call 0 94 8300 8300 (India)   The economy goes through cycles : it expands for a few years and then contracts. Study of historical data suggests that different sectors tend to perform well on the stock markets during different stages of the economic cycle. While history never repeats itself exactly, some broad patterns tend to recur. Investors can take advantage of the sector rotation theory to move their money from those sectors that have seen their best times to those that are likely to do well in future.   The person who developed the sector rotation theory is Sam Stovall, chief investment strategist at Standard & Poor's. He developed this theory by studying data on economic cycles going as far back as 1854 provided by the National Bureau of Economic Research ( NBER ) of the US.   When trying to correlate stock-market perfor...

Rajiv Gandhi Equity Savings Scheme (RGESS) set for launch this week

The finance ministry is set to notify the Rajiv Gandhi Equity Savings Scheme ( RGESS ) this week.   Though Finance Minister PChidambaram had approved on September 21, the scheme announced in this year's Budget, and had said that the revenue department will notify the scheme and the Securities and Exchange Board of India ( Sebi ) would issue relevant circulars within two weeks, it is yet to become operational.   A senior finance ministry official said the revenue department was expected to notify the scheme any day now to attract retail investors to the equity segment.   He added that Sebi was not required to issue any circular for the operationalisation of the scheme and that after the issuance of the revenue department's notification, investors would be able to avail of the benefits of the scheme.   The official accepted that implementation of the scheme had been delayed due to the deliberations on inclusion of mutual funds ( MF ) in it.   ...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now