Things to remember while investing through sip:

Author:

paressh

Systematic investment plans of mutual funds offers investors to curb market volatility.SIPs offers benefits of value averaging along with basic mutual fund advantages like tax free longer term capital gain ,Tax saving u/s 80c for Equity linked saving schemes(ELSS),diversification etc..But investors needs to understand some things regarding their investment:

1.Long term approach: While investing in mutual funds through SIPs long term approach of 15 – 20 yrs. is essential. History shows that there will be essentially few good years to come ahead, But, its difficult for anyone to tell which years will be? So remain invested in market is essential.

2.Diversification: Investors should invest in combination of different types of funds i.e.in combination of Large cap,Mid-cap and small cap funds.Investors can also add Gold funds for SIP purpose as it will provide good diversification to their investment..Also remember to avoid over diversification.Too much diversification can affect the returns in longer term.

3.Volatility:There is always short term volatility in market and its possible that market goes against your capital. But we should understand that both profit or loss are not permanent in equity markets.Its a volatility not profit or loss.

3.Give enough time for money to grow: No one can become millionaire overnight by trading markets . Sufficient time needs to given to grow your investment.Remember that sharp rise is always followed by sharp fall.while consistant investment is fruitful over a longer period of time.

4.Frequency of investment:Uptill most of the mutual fund houses were providing facility of monthly and quarterly sips.But now some funds are giving weekily,daily investing facilities also.Its a matter of research that whether daily/weekly SIPs are beneficial or not,,but investors already investing in monthly basis,may try the options of daily investing.Some fund houses are offering as minimum as Rs.100/- per day.

4.Do Not target the returns: Do not target the returns per annum basis. Remain invested for longer term Market will give you returns.

5.Do not rush to book profits earlier:It should not happen that you missed the bus due to earlier profit bookings.Of course,one needs to take informed decision about it.

So try to set your goals for longer term and start investing….

Happy Investing!!!

Article Source: http://www.articlesbase.com/investing-articles/things-to-remember-while-investing-through-sip-4428953.html

About the Author

Paresh