SIP in Mutual Funds is the best

Mutual Funds in India has been the best option to get returns better than Fixed Deposits & SIP in Mutual Funds is the most suitable way to construct your Portfolio in a long run where you invest a fixed amount of money every month in different schemes of Mutual funds.

What is Systematic Investment Plan?

In simple language, SIP in Mutual funds means you instruct a Mutual fund company to debit your account with a certain amount and invest in mutual funds schemes where you intended to invest & in the process an investor is able to accumulate mutual fund units every month & build a big corpus in a long run.

How does a SIP helps??

1. You will never ever loose in a long run

Give me single instance where a mutual fund investor lost money in a 3 year horizon or a 5 year horizon when he invested in Equity mutual funds systematically. I know, there is no such instance. Lets take a real time example to explain this to help my readers getting a better view.

Example- Performance of HDFC Mutual fund, HDFC Top 200

Period	Total Investment Rs 5000 PM	Market Value	Returns (Annualised)
Last 1 Year	60,000	62,400	7.24%
Last 3 Years	1,80,000	2,66,666	27.41%
Last 5 Years	3,00,000	4,91,700	19.91%
Last 10 Yrs	6,00,000	31,40,850	31.15%
Since Inception 1996	8,75,000	80,44,000	27.04%

Also there is no Mutual funds in India which has given a negative return or NAV of Mutual Funds has never been negative if a investor holds on for 3-5 years. HDFC Top 200 Fund is the best performing funds in Equity Diversified Funds.

2. Helps you invest systematically

Lack of disciplined approach to investing hinders the financial goals of any investor. The retail investor always tries to buy in his own way & is always caught at the top when others are greedy. The solution to this problem is SIP where the investor invests every month without looking at the NAV of mutual fund. He instructs his banker to debit his account every month by such & such amount & I am sure he would be getting a NAV of mutual funds schemes at a much lower price than Lump sum Investment. 

3. Benefit of Rupee Cost Averaging 

It helps you take the advantage of Rupee Cost Averaging. It is the process of buying units of Mutual funds at regular intervals that may be monthly & accumulate in a long run without looking or considering the current NAV of the fund. For reading the detail about Rupee Cost Averaging, read this article

Rupee Cost Averaging takes you to become a Crorepati

4. Answers to the Famous Questions in Stock Markets?

 It helps you to take away from the famous questions which every investor has.

• What is the bottom of the market?
• Should I buy today or wait for further correction
• I will invest later on, the market has already run up too much
• I am waiting for a correction & when the correction will come you will not have the money to invest

After reading this article, you may Invest in SIP & Download SIP Calculator

Also read

1. Systematic Withdrawl Plan
2. Portfolio Advisory and Mutual Funds
3. Endowment Plan
4. Dont Trade But Invest for Simple Reasons

Regards
Mayank Gupta
Founder
mayankportfoliomanager@yahoo.com
http://www.wealthbazaar.in/