We at NriCapital.com offer 1000s of SIP plans from various mutual fund companies from India – all under one roof. From equities to debt, from gold to infrastructure, we have it all.
Open ended mutual funds have high liquidity. You can invest in them as quickly as you dispose of them. Investing in mutual funds is risky, but the difference is that you are allowing a fund manager to manage the risk for you.
Market linked stock risks are pertinent to any type of investment – even mutual funds. But systematic investment plans (SIPs) in mutual funds mitigate that risk. SIP is a way to invest periodically and regularly towards a mutual fund. This financial product is designed in such a way that it spreads your investments across a period of time. So you only absorb a part of the risk with a part of your money.How the SIP works
Assume you invested Rs. 1000 per month for two years to a SIP mutual fund. The amount you invest per month (Rs.1000) is fixed. Based on market fluctuations, the Net Asset Value (NAV) increases or decreases. The fund’s market price may in some months be Rs.450, and in some months Rs.250.
This Net Asset Value increases or decreases the number of units you can buy. If it is Rs.450, you buy Rs.1000 divided by Rs.450 = 2.22 units and if it is Rs.250, you buy Rs.1000/Rs.250 = 4 units. So if the NAV is less, the more units you can buy and vice versa.
In the long run, the number of units you earn based on the NAV balances out your cost of investment. You are insulated against market risk in this manner.
Understanding the advantages of SIP investments
There is no necessity to time your investment
In the case of purchasing equities or mutual funds (non SIPs), you have to time your investments. A wrong move can cause an apocalypse. In the case of SIP investments, you don’t need to time your investment. You just allot a fixed amount per month, and your amount earns units every month based on the NAV. If in some months it earns less, in some months it earns more. You don’t expose your entire wealth to the vagaries of the market through a SIP investment plan. You are exposing only a part of your investment – like in the above example; Rs.1000.
You don’t need to run for cover if you miss an SIP installment
If you don’t pay your bank EMIs even for a month, the bank people land up at your door. In the case of SIPs, no such thing happens. An SIP is your way of becoming profitable. It provides you an opportunity to expect high returns. So the key ingredients that you need to make the SIP investment plan a success is focus and consistency.
SIP investments have high liquidity
Open ended mutual funds such as the SIP investment plans have high liquidity. In case you are not inclined to pay monthly installments, you can terminate your plan.
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