Spend, Save and Invest Smartly
Systematic transfer plans it is an annex of systematic investment plans. It is a better way to invest lump sum money into equities. In an unpredictable market, it also allows possession of units at lower costs while the rest of the money earns higher returns, explains.
Over the past one month, equity investors across the globe have seen their destiny move backward and forward. Concerns over sub prime lending, yen-carry trade and the intimidating spectra of a US slowdown not only battered global equity markets, but also raised doubts among several retail investors on the course of the markets in the short- to medium-term.
In India too, investors have had a hard-hitting time given the kind of gyrations the markets have been witness. The Sensex has seen several major corrections since it touched it’s life-high of 15,868 on July 24 this year, and after sinking to 14,000-levels it bounced back to 15,600-levels.
A retail investor is likely to remain puzzled as to whether it is the right time to enter the markets? Should one look forward to some more corrections? Unluckily, no one can predict the course of the market. For a retail investor, timing the entry or exit is a complex act to follow. The best way to survive a volatile market is to keep investing in equities and stay put with a long-term parallel without bothering to a large amount about the market ups and downs. In the course of regular investing, one gets to invest in the highs as well as the lows. This helps in averaging out the market explosive nature. The investor keeps investing a certain amount (as small as Rs 50) at standard intervals. Seeing that the market soars, even the value of the investment scales new highs. And when the market tanks, the value of the mutual fund units, - net asset value (NAV) have come down. This means further units for the same SIP amount.
Apart from inculcating the obedience to invest frequently, the reality that the investor has to continue invested for at least two years in a fund to free his/her investment in one-year SIP from capital gains tax, gives enough time for the money to stay put in the market and appreciate.