E-Paper
SIPs: Small investment, large gain
INVESTING SMALL amounts of money can also lead to building wealth in the long-term without the hassles of consulting an investment adviser every time you want to buy shares.
INVESTING SMALL amounts of money can also lead to building wealth in the long-term without the hassles of consulting an investment adviser every time you want to buy shares.
And if you can spare just Rs 500 to Rs 1000 every month to invest in the stock market, the Systematic Investment Plans (SIPs) of various Mutual Funds can make you achieve your financial goal over the long term with substantial gains from your portfolio of investments.
“The SIPs have been doing very well in Uttar Pradesh, as the cost of entering the market is very small and affordable by even the smallest investor without any hassles” says Karvy Stock Broking Ltd (Lucknow) vice-president Nitin Saxena.
The SIP is designed for those who are interested in building wealth over the long-term by investing a small amount of their savings every month for buying equities, while using the Mutual Fund route.
“Many Insurance products even have SIP facility for those who cannot afford to pay lump sum premia. The premia are drawn from the savings account of the policy-holder through the Electronic Clearing Service (ECS) of banks”, says Bajaj Allianz Life Insurance Company Ltd regional manager (UP & Uttaranchal) Manoranjan Sahoo.
“Even with mutual funds we would recommend that small investors do not try going into direct stock market investment and instead opt for the SIP, where their funds are in the hands of experienced portfolio managers”, he said.
An interesting fact of SIP is that anyone can one subscribe to an SIP facility by opening an account with a Mutual Fund and providing post-dated cheques of periodic investment based on one’s convenience.
The benefits of SIP:
One need not spare time for depositing a cheque every month in a bank for investments. The investor has to just submit post-dated cheques with the completed enrollment form. The mutual fund will deposit the cheques on the requested date and credit the units to one’s account and will send the confirmation for the same. Thereafter, every year the Mutual Fund would provide an account statement showing the amount of investments made at various time, total number of units held and the market value of the investment.
Compounding benefits:
The secret of building wealth is to start investing early and to stay invested for a longer period of time. The small investments made over the year would swell into a major saving in the coming years.
The art of rupee cost averaging
As the value of units (Net Asset Value) appreciates or depreciates, the number of units allotted to you, also vary in the same proportion. This is rupee cost averaging. The money invested would buy only those many units, which are affordable with the monthly cheque provided by you.
