Mutual Fund SIP – A Smart Way For A Smart Investor

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The stock market is a dream land for most investors who know of its limitless money earning potential. But it is not a money-making machine that a few believe it is, churning out great returns all the way. There are millions who have made money off the markets, just as there are others who have lost money trading the wrong way. Although it functions on the simple principle of ‘Buy Low, Sell High’, most retail investors do not make much out of it.

That is simply because you can never know when and how the markets might move. It is therefore better to leave your financial planning to a professional who can expertly manage your money. Since, not everyone can afford to hire the services of a personal fund manager, the best way to invest is via a mutual fund.

A mutual fund allows you to invest which will be managed by their experts on your behalf for a small fee. Investing in a mutual fund can help you diversify your portfolio which is not possible for retail investors conventionally. The risk too is minimised since your investment is pooled-in with other investors’ money and handled professionally by an expert.

But even this isn’t foolproof now, is it? An investor having invested in a fund during the historic highs of January 2008 might not even have been able to break even. That is why, it is better to invest in a Mutual Fund SIP (Systematic Investment Plan) where you can invest small amounts at regular intervals rather than making a single large investment at once.

Mutual fund SIPs help you invest in a mutual fund of your choice in a disciplined and regular manner. Investing in SIPs help you average your buying costs and tide over irregular market swings. This way you do not have to worry about timing the markets and making your purchase at the lowest price possible.

Like Mutual Fund SIPs, including Systematic Transfer Plans (STPs) and Systematic Withdrawal Plans (SWPs) in your financial planning can help you book partial profits at regular stages. By using STPs and SWPs in combination, you can redirect your profits from the current fund into a second investment scheme or can simply enjoy your gains.

It is always better to follow professional advice while investing. If you can’t hire an expert to do your financial planning, there are several wealth advisors online too who can help you to plan your finances depending upon your profile and risk taking capacity.

Investing is a precise art and it is advisable that you go about it in an informed manner.

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