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Investing in Volatile Market

Vishal 
on 29 October 2010

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How you will invest in Equity especially when market turns volatile? Only best way to go in such cases is by investing your money through SIPs. SIPs are considered as best way to make money, out of volatile market. The basic fundamental is that you simply buy equity at low and sell when it goes higher. But will it be possible that you always gets it right, no chances are there that sometimes you may be wrong. But these failures are the only things that turn a normal investor into a trader. Market scrambled many times, and when market scrambles investors they are in hurry to pull out their money from market, but when market goes higher these are the same investors which pulls up their hairs, that they should have invested in the scrambling time of market rather than pulling out their investments from market. Thinking about investing in Volatile market, SIPs is the best option to go for. SIP stand for Systematic Investment Planning which is process of investment that helps you to invest a pre-determined amount into mutual funds (equity, debt, or hybrid funds) at pre-determined dates. SIPs tend to be most rewarding when done into equity mutual funds, because equity by its very nature is the most volatile asset class. Hence an SIP into an equity fund gives the greatest opportunity for to average one's costs over market highs and lows. Taking a SIP instead of a lump sum investment, offers investors with the following advantages:

1. Self Control Most investors find it difficult to resist the urge to try to time the markets. We all have the same weakness when it comes to a trying to catch a market low or a market high. But the task of doing this correctly all the time is incredibly difficult even for expert investors. An SIP helps to resist this urge by automatically making investments every month. Also, it helps to ensure that you invest regularly, and reduces the chances of impulse spending.

2. Averaging your Costs If market lows,gave you a tough time, then SIPs would have been of help. By buying at various market levels, your investments would have been made at different NAVs of the mutual fund, therefore averaging your costs.

3. SIPs work best in a falling market - they ensure that you buy when the markets are falling i.e. you Buy Low! It is only in markets that are continuously falling that an SIP would not be helpful. However over the long term, markets rise. That's when your SIPs would reap profits. While investing systematically in mutual funds, if you choose about 3 - 5 funds depending on your asset allocation and risk appetite, you can choose different SIP dates for your investments. This means you are investing on 3 or 5 different market days per month, instead on 1. So with 5 different schemes you can invest on 60 days in a year. This would help you average your costs over 60 market days instead of 12 market days. Thus, the more market days you invest for, the more you are averaging your costs and the greater the chances for better returns.

Light on the wallet.

Many times it is not possible to invest a substantial amount in one shot. Investing via an SIP helps to invest even small amount at regular intervals. Just remember to invest as much as is comfortably possible. Even a small increase in your SIP can have an excellent effect on your wealth over the long term.

PersonalFN provides  Financial Planning Services and Mutual Fund Research and Recommendation services to those investors, who are interested in Investing in Top Mutual Funds in India ,Get recommendations on top Debt Mutual Funds india.




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