Systematic investment plan (SIP) is best way to grow money. SIPS do not need market time. It helps you in rupee cost average to minimise investment risk. If you look it is not easy. You need to decide whether you are investing through lump-sum or SIP mode.
Different ways to Invest
There are two ways to invest. Like lump sum and SIP mode. It depends on funds availability to invest in small instalments. You can invest in both modes. If markets are upward movement lump sum investment will perform better than SIP or STP. In volatile or bearish market SIP perform better as compare to lump sum investment. An external factor performs of underlying scheme.
If you look at equity market history. You do not hold trend all time. Due to your periodic nature fix invest get benefit of equity market in SIP. Salary person approach SIPS also. It goes very well with funds available to save and credit of salary. See do you need financial Independence?
You can invest even equity markets. So it is best way to ride through volatile.SIP help mitigate market timing risk. But if markets are bull then SIPs will underperform. You all know that market is volatile for long term market trend upwards
Even market volatile SIPs will give advantage to you. You keep invest at different level. If market is high you buy fund unit and if market are low you buy more units for same amount. This helps you to ride out to earn better returns.
SIPs work well on two ways. They reduce market risk time by spreading investment for period of time. SIPs encourage to save good investment. For example, you have Rs. 2.3 lakh to invest in August 2016.You invest lump sum on August 2016 in diversify multi-cap fund like HDFC equity.
Then, market crashed by 1,700 point on August 2016. After month your investment will be down by more than 6 per cent. If you hold your investment very brave it will grow to Rs.2.6 lakh by June 2017. Most of us run away after seeing major loss. Very few will invest.
You decide to start an SIP of Rs 10,000 in same fund instead of lump sum. Then, till June 2017 you have invested Rs.2, 20,000 and your investment will grow to Rs. 2.7 lakh. Thus you will get return more than 20 per cent per annum.SIP gives real benefit of investment. You never know when market crash.
It is best to spread your investment for period of time instead of taking risk. Investment do to generate good returns.SIP are good process to invest. Also regularise investment by minimizing risk. But if you want to invest in mutual funds for purpose of doing tax saving. The you will go for lump sum investment.
So you can invest lump-sum or an SIP mode differs from person to person. It may relate to cash flow, holding investment, risk appetite or any other needs. Thus before making any investment it always takes better guidance from financial advisor. Who can help you out in proper investing in time?
See types of investment list. Check smart way to make your money grow. Also see 10 best investment options in India. For more details you can view basics of investment in mutual fund. You can Start Monthly Income Plan (MIP)