Skip to main content

Should I continue my SIP now?

This is a universal question that can be answered with a simple answer: YES and a detailed answer below.

SIP is Systematic Investment Planning and it is designed for people who want to be involved in market during all the time, thereby minimizing the risk involved in the volatility of the market. There are many mutual funds currently providing with SIP for the investors and almost all the funds have either the online agents or the agents directly collecting the cheques from your doorstep for investing in your favored fund. Check out Are agents your friends? before deciding and investing on their suggestions. There are no entry load for most of the mutual funds now but still all the agents would still get the Trial commissions which would differ from each fund house to fund house. So, its better to be aware rather to cry later.

Coming back to the SIP fundas, You invest a constant sum of amount irrespective of the market condition. It works best for the equity mutual fund and I am going to take an example of the equity diversified mutual fund.

Say, If you put Rs.10000/- every month on to a mutual fund and this mutual fund's NAV differs according to the market conditions, you get the number of units according to the current NAV.
NAV No. of Units
April 2011 55.66 179.66
May 2011 61.21 163.21
June 2011 58.27 171.61
July 2011 65.66 152.3

From the four months data itself, it can be clearly seen than, As the NAV increases, the no. of units you buy decreases and when the market is down (NAV decreases) and you buy a lot more for the same money and the no. of units increases. So, you already know, when the market goes down, you want to buy more and when it goes up, you want to buy less and you are doing exactly that with SIP.

This works best when you are invested for extremely long time and you might say, I can invest the whole Rs. 20000/- during the month of June 2011 after April 2011 instead of May 2011. Its extremely hard to time the market and what would you do if the market turns its head and ran towards 63 NAV. And if you are a long term investor, its best to remain invested in the market and continue your SIP for a long time to come.

And never forget to get out of your equity exposure at the right time (just before the requirement for your goal, say 13 years from now, if you are planning for your retirement at 55 and your current age is 40) and move all your funds to safety to the debt level so that you are in never a position to sell all your holdings at a loss.
Labels:

Comments

Post a Comment

Popular posts from this blog

Nokia E51 WLAN Settings

Nokia E51 is a smart phone with almost all the features available in it. It looks really slim and comes in three colors. It has loads of features and highlight of them all is the connection through the Internet through WLAN. You can get a Internet connection from the service provider and ask for the wi-fi router. With the wi-fi router, you can connect to the Internet through various other devices like Laptop, Nokia E51 etc., You will be provided with the password for the WLAN connection and only if you enter the password correctly you will be connected to the Internet through that WLAN. As you may expect, this password will be asked only when you connect to Internet through this WLAN for the very first time. In Laptop/Computer, you have Network settings to identify and modify the settings if wrongly entered. But this is somewhat tricky in case of Nokia E51! In Nokia E51, You have the option of Browse WLAN right at the home page for you. If you have customized for something different, u
10 comments
Read more

Internet not working on laptop - what should you do?

 When the internet is not working, consider looking at the available networks and see if you can switch to any other internet that would work Further, troubleshoot by restarting the modem and the laptop once to make sure there are no issues with either of them. If none of those works, consider contacting your interest service provider to help troubleshoot.
Post a Comment
Read more

Treasury bonds Vs high yield savings

 You have some additional cash and are looking for the best place to park to get more money from it? If you answered yes, couple of options that you might be considering could be 1. Treasury bonds 2. High yield savings with bank fixed deposits This is especially in United States.  First let’s look at the commonalities: 1. Both are absolutely safe and assured 2. The capital preservation is assured Now, let’s look at when we should look for which one 1. If you could need this money anytime soon (within the next six months to a year or lesser), great option is to choose high yield savings. One option to consider is PayPal savings (which offer 4%+ APY these days.  2. If you don’t need it immediately and consider ways to get the maximum amount in an assured way, you can consider 15 month fixed deposit in certain banks, which offer over 4.65% APY for 15 months. 3. If you think the inflation is going to remain high and want to save with the government, you can choose the treasury bonds as an
Post a Comment
Read more