Wealth creation out of capital market can be very tough and time consuming task. The people who earn through capital markets have to give too much of time to understand its every aspect. But with mutual funds, investing in capital market has become all the simpler and less risky. If followed systematically it also lead to wealth creation. Systematic investment plan, SIP is being termed as a path to wealth creation due to its feature of disciplined and long term nature. Capital markets are made up of a lot of different investors who participate in it. There are large institutions, such as fund houses, as well as companies, brokers and individual investors. Over the long-term, the financial market can do well but in the short- term, prices fluctuate on many accounts but the basis of fluctuation is quiet similar like fundamental reasons like company news, market sentiment, expectations, rumor or competitor activity.
There are statistical measures and techniques, such as price-earning ratios, which help determine the true value of a stock or bond, but many times in the financial market, rational measures are often disregarded and sentiment can take over.
Deciding when to invest in this environment can be a stressful task. If the market is doing well you may fear that you're buying when prices are too high. By contrast, when the market is falling, there is a relationship to invest due to fears that it may fall further. So what should an investor do to avoid having to make these timing decisions?
Many a times by the time a common investor realize that its time to invest, the market is already at its peak.
The Systematic Investment Plan is not a type of mutual fund. It is a method of investing in a mutual fund. Systematic investment plan is commonly known as SIP. SIP is a good way to invest as it leads to disciplined and regular investment.
When you buy the units of a fund, you may do so when the NAV is really high. For instance, let's say you bought the units of a fund when the market is at its peak, leading to a high NAV. If the market dips after that, the value of your investments falls and you may have to wait for a long while to make a return on your investment. But, if you invest through a SIP, you do not commit the mistake of buying units when the market is at its peak. Since you are buying small amounts continuously, your investment will average out over a period of time. Investing on a regular basis removes the stress of "timing the market" because you are employing the concept of "Rupee Cost Averaging". If you are an investor in mutual funds it means that you buy more units when the purchase price is low and fewer units when the purchase price is high. The trick to all this is to remember that it's not the price you pay for each unit that matters. It's the average price per unit over time that determines your overall return. This will be lower than the cost accrued to lump sum investment.
More over a systematic investment carry certain other benefits for the investors like diversifying the risk. If you are investing regularly then the fluctuation in the market will not give heart ache to the investor as the investment is not done lump sum. The investor spreads out his risk through the path of SIP.
The amount to be invested to get started is very less and there before it is in everyone's reach. Some insist the SIP must be done every month. Others give you the option of investing once in three months or once in six months. Similarly investor can avoid timing the market by withdrawing constant amounts periodically (Systematic Withdrawal Plan), or systematically transferring investment between different schemes (Systematic Transfer Plan).
Would you like to have access to the SIP calculators which are designed to help investors in analyzing different scenarios for automatic investment plan, which include:
Your sip need, your sip amount, sip return. Get the calculator for download on Godmind, s website.
You can put different figures / amount for generating different results and know how secured your financial future would be if you invested 1000 every month starting this month, for the next 20years and you are expecting a return of 20% (I have taken the minimum consideration , some funds give 35% to 50% return for such medium / long term investments) – the total amount that you will be receiving at the end 20 years will be: 2476194.Your total investment for 20 years was 240000.