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Invest in equities, but systematically

If you are confident of investing in equities yourself, what should be your strategy in volatile markets? One way is to invest in tranches so that your money gets averaged out over the troughs and crests of market movement. Like in MFs, you also have the option of having a systematic investment plan (SIP) in stocks directly, too. It gives you the flexibility of investing slowly but steadily in the stocks of your choice.

india Updated: Aug 27, 2011 02:45 IST
Saurabh Kumar

If you are confident of investing in equities yourself, what should be your strategy in volatile markets? One way is to invest in tranches so that your money gets averaged out over the troughs and crests of market movement. Like in MFs, you also have the option of having a systematic investment plan (SIP) in stocks directly, too. It gives you the flexibility of investing slowly but steadily in the stocks of your choice.

How to open a stock SIP?
You need is a trading account with the brokerage offering this service. You also need a demat account, which could be with any other brokerage as well. You need to apply for it either online or through a physical application form. The brokerages that offer the facility as of now include Reliance Securities, HDFC Securities, Kotak Securities and ICICI Securities.
Brokerage fee: Charges depend on the brokerage house and is the same as is applicable on normal stock trading. You pay a brokerage fee every time you buy or sell. Also, some brokerage houses charge a one-time fee while opening an SIP, while others offer them free of cost.

How much can you invest?
You can specify the exact amount you want to invest at regular intervals, subject to a minimum limit, which varies from broker to broker. You can also buy a certain number of stocks on the specified dates. The stocks can be from one company or from multiple companies. The minimum amount for some brokerages is as low as a single unit of a particular stock. Some brokerages also offer you the option to fix an upper cap for investment.

When can you invest?
You can invest once a month or at the gap of two or three months. The dates you choose every month are known as trigger dates.

Does it work?
This strategy helps those who are averse to making huge investments at a go or do not have the wherewithal to do so. People who have been avoiding markets due to volatility can take this route.

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