Ramalingam Kwww.holisticinvestment.in
In this competitive world everybody wants to make or get more money. For each and every investment everyone requires more return. One of the easiest and safest way to make more return is Mutual Fund SIP (Systematic Investment Plan). Actually, before to invest most of the investors has lot of questions in their mind. Especially during market fluctuations, of all, there are two questions run in everyone’s mind.
Why Investors should not stop/withdraw Mutual Fund SIP during volatile times?Did you know that Mutual Fund SIP is the sweetest fear fighter, to meet out market fluctuations? Yes, you read it right. First and foremost point of investing Mutual Fund SIP is to overcome market volatility.
Mutual Fund SIP enables you to buy more during down times: Since a fixed amount is spent for investing, market fluctuations can be overcome. Risk can also be minimised. It enables investors to buy more when the market price is low, which actually is the proper time to buy.
When the market is subdued, investors can buy lot of units because the prices go low. Buying at low prices is one best way of accumulating more mutual fund units. When the market booms, investors can sell it in huge and probability of getting profit also goes very high.
Mutual Fund SIP guides you to buy more units when the prices go downcast. Look at your portfolio when the market goes up, you would have made a huge profit by buying a lot at a lower price. How does it happen? Rupee cost averaging that occurs due to SIP average out the cost over a period of time. You will be able to buy more instruments when the Net Asset Value (NAV) goes down and you can opt to buy lesser number of units when NAV rises up.
Mutual Fund SIP is the best long term solution to consider when the market is down: An important source of long term financing, equity offers lot of advantages as well as good returns. Have you ever thought of stopping your children from going to school just because they scored low in couple of exams? Schooling discipline the way children study and behave, right? Likewise, you will witness ups and down in the market. Mutual Fund SIP streamlines the processes and help you gain in the long term.
Mutual Fund SIP is the plan through which investors can invest in mutual funds through small and periodic instalments in a regular systematic way. This system helps in gain high benefits even if the market fluctuates.
Mutual Fund SIP in a volatile market: The success of equity investment depends on market fluctuations. Not only selecting the reliable companies (where?) and when to invest is also playing a vital role in getting high returns. Whereas, mutual fund SIP helps in solving the problem of when and where to invest during volatile times.
Choose Mutual Fund SIP way to grow your investment during this volatile market.
Mutual Fund SIP is the right way if the market is down for some temporary reasons: Many organizations today have performance measurements of the employees to run successfully. No company will lay off the employee if he/she has under-performed in a single quarter. If they start laying off the employees for under-performance due to temporary reasons, the organization will end up having significant trouble in operations.In the same way, there are various temporary factors create an impact on how the market works and also the mutual funds. For example, elections anticipated in the coming months can create a negative impact on certain instruments. Selling these without thinking long term will lead to a negative mode. If you continue your mutual fund SIP during these temporary down phase you will reap more once the market recovers.
What needs to be done to keep your SIPs successful?Prior choosing any scheme, evaluate the qualitative and quantitative parameters like returns over extended period of time, fund house’s quality, risk ratios, profile of fund’s manager, objective and necessity of investment etc.
1. Analyse the performance of Mutual Fund SIP periodically2. Avoid starting two Mutual Fund SIPS in similar schemes3. Do not go for any fund just because they are star rated. Analyse them appropriately.
Investment models are created to meet out financial crises. So, a disciplined way of investment is required to grow your money. A study says, even though Mutual Fund SIP delivers lot of advantages, nearly 11.5 lakhs Mutual Fund SIP in equity funds have been stopped in 2012. And another 4.93 lakhs were not reinvested. Even the situation continues till now.
It is utmost important to understand that the right allocation of funds on Mutual Fund SIPs will not only save you during down times but also reward you in multiples when the market is up. Terminating Mutual Fund SIP, when the market is down is one of the worst investing decision people make. Never do this.
The author is Ramalingam K, CFP CM is the Chief Financial Planner at holisticinvestment.in, a leading Financial Planning and Wealth Management company.
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