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Buy SIPs to beat market volatility

business Updated: Aug 21, 2013 21:02 IST
Manik Kumar Malakar

Volatility in the markets seems to have become the new normal. But even in these confusing times, there are still ways to make money from equities.

One route is systematic investment plans (SIPs), which act as a shield against volatility by investing small amounts in a mutual fund regularly through rupee-cost averaging. “The minimum amount to be invested can be as small as Rs 500 and the frequency of investment is usually monthly or quarterly,” says G Pradeepkumar, CEO, Union KBC AMC.

Rupee-cost averaging from the SIP route of investing works in favour of investors amidst uncertainty, says Ajit Menon is executive vice-president and head of sales, DSP BlackRock Investment Managers.

“SIPs are a suitable investment avenue to withstand market volatility, as they allow you to take advantage of market volatility without having to time the markets,” says Gopal Agarwal, chief investment officer, Mirae Asset Global Investments (India) Pvt Ltd.

Thus, when the markets rise, the investment amount being fixed, you buy lower units of the mutual funds, while when the markets fall, you buy more units. This essentially leads to a lower cost of purchase and potentially higher returns on investments.

SIPs are suitable to combat both the equity market volatility as well as the rupee side that has been causing uncertainty in equities.

“SIPs are the best method of combating the volatility in the markets, while still taking advantage of the equity markets,” says Navneet Munot, chief investment officer, State Bank of India MF.