Printer Friendly

WHEN IN DOUBT, SIP.

GIVEN that the Sensex, the broad equity market indicator, is near its lifetime high of 30,000, the dilemma before most investors is: where will it go from here? Is the growth for real and will it take the Sensex higher, or is it a bubble and likely to burst? Those who missed the current rally must be wondering if it's the right time to enter the market or if it makes better sense to wait till the market corrects itself before investing.

Investment gurus have always cautioned against trying to time the market.

Anytime is a good time to invest in equities, provided that you are investing for the long term.

If, regardless, you are timing the market, then investing all your money at one go can be disastrous. Also, if you don't have the knowhow to directly invest in stocks, it is better to invest in equity mutual funds through systematic investment plans ( SIPs).

As the name itself suggests, SIP involves investing a fixed sum of money on a particular date at monthly, quarterly or yearly intervals, the monthly

SIP being the most preferred option.

SIPs afford certain benefits: Rupee cost averaging: As investments in SIPs are staggered over time, you continue buying mutual fund units irrespective of ups and downs in the market.

Given that you are investing a fixed sum every month, you end up buying more units at lower prices when the market is at a low and lesser units at higher prices, which ultimately reduces the average price of units.

Overall, it ends up in higher returns when the market goes up.

However, if you make a lump sum investment when the market is at a high, the value of your investment gets eroded with the next market dip as you would have invested at a higher price. However, if you make a lump sum investment when the markets are at their lowest point, you stand to make higher gains than you would through SIPs. But it is difficult to determine when the market is at its lowest.

Investing small amounts: SIPs allow even the small investors to purchase equity mutual funds as the minimum investment in most funds is as low as Rs 500. The periodicity of the SIP can be selected on the basis of one's cash flow. An SIP helps you grow even a small investment into a large corpus thanks to the power of compounding.

The trick is to start early.

The SIP amount can be changed at will

Copyright [c] 2017 India Today Group. All Rights Reserved. Provided by SyndiGate Media Inc. ( Syndigate.info ).

COPYRIGHT 2017 SyndiGate Media Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2017 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:Mail Today (New Delhi, India)
Date:Jun 1, 2017
Words:435
Previous Article:PRE- MONSOON DELIGHT.
Next Article:KOHLI'S BOYS ARE A STRONG BUNCH.

Terms of use | Privacy policy | Copyright © 2022 Farlex, Inc. | Feedback | For webmasters |