Tech Jungle


6 good reasons to invest in SIPs
June 6, 2007, 2:38 pm
Filed under: FINANCE

Investment in SIPs are now a days considered safe. As the Mutual funds cater the needs of every kind of investor : be it aggressive or conservative. Also, a thought of portfolio can generate even better returns than that of Investing in Equities only..Let’s see how investment in SIP is better than investing in Equity, primary market:
Fact No. 1: If one want to make profits from Equities, he has to remain invested for a long period. Yes, the returns from Equities are far better than of Debt instruments.
Fact No. 2: In short duration, equity shows very sharp ups and downs, which many of us are not able to tackle with and end up in lesser returns or loss.
Fact No. 3: A lot of risk is involved in Equities which can even extend to losing the entire corpus invested.
Fact No. 4: Investment in equities requires one to be in constant touch with the market and regular updation of the portfolio with the changes.
Fact No. 5: Equity investment requires a lot of analytical power and research.
Fact No. 6: Large amount is required in buying good scrips.

For a layman, Mutual fund is the answer to above problems. One can purchase mutual fund without having a demat account. The investment in Mutual fund can be made in Lump-sum or through Systematic Investment Plan (SIP). Wherein SIP mutual fund can prevent from the pitfalls of equity investment and one can still enjoy the high returns. And it makes all the more sense today when the stock markets are booming.

Dealing with Equity Market is a task of an Expert

The corpus of the Mutual fund is managed by the professionals or experts. And this is the major advantage of investing in Mutual funds. The experts keep a strict vigil over the market and daily developments and make appropriate changes toe ht portfolios by adding new scrips to the fund or selling the underperforming ones, thereby keeping the fund value high. These experts have the expertise to make informed investment by researching company-industry-economy and the aggregate impact. Since these people are related to market, they are always in touch with the market which a common man can’t. Hence investing in Mutual fund saves time and effort of common man yet rewards a handsome return.

Benefit Of Diversification

Another advantage of investing through Mutual funds is that the whole corpus so accumulated is invested in a number of scrips by the fund manager thereby reaping the benefits of large investment though the investor has contributed a small amount For an individual, to invest in a number of good scrips, huge amount is needed, By investing in Mutual Funds an investor can reap the benefits of diversification.

Fair and Well Regulated

The Mutual Fund industry is well regulated both by Securities and Exchange Board of India and Association of mutual funds in India. The regulations issued by these bodies have ensured smooth and transparent market for Mutual Funds in Indian Industry.

SIP Overtaking the Timing

Investment in Mutual Funds through SIP removes the biggest difficulty of timing as to when to enter and when to exit. It also solves the problem of choosing scrip from among the big number to a great extent.

Investment Amount to be decided by investor

Mutual Funds allow investor to invest very small amounts (Rs 500 – Rs 1000) in SIP, whereas equity investment requires a huge amount to be invested. This makes investing easier for us as it does not strain our monthly finances and budget. It thereby becomes the ideal investment route to enter into equity market.

Cost Reduction and Regular investment

SIP requires regular investment over a selected period of time which enables an investor to invest on a regular basis. SIP enables an investor to buy more number of units when market is low and less number when market is high which at the end average outs the cost of purchasing when the markets were high with the lows. This reduces the cost to the investor.

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