Benefits of Systematic Investment Plan

In the earlier post, we had discussed about Systematic Investment Plans . Lets make an effort to understand how it is better than other vehicles of investing in mutual fund.

We have already discussed that Systematic investment plans give  the investor an option to save regularly( just like a recurring bank deposit) and then invest these savings  in a planned manner in mutual funds. These small periodical savings become big chunk of money over a period of time. With this disciplined manner, the investor enjoys the benefits of compounding.

 Another advantage of SIP is that an investor  can enter or exit the market irrespective of the time. The biggest problem in the equity market is to know when is the right time to invest or to exit. SIP actually helps you to solve the timing issue to enter and exit the market.  In a falling market, you tend to add more units while in a rising market , you end up gaining on the NAV front. So it provides you ample opportunity to spread out risk.

SIP provides you with the option of  maintaining a diversified portfolio. 

Diversification reduces the overall impact on the returns from a portfolio, on account of a loss in a particular company/sector.

But the best advantage of going in for the SIP is that it doenot strain our day today finance.  You can start an SIP with as low an amount as Rs 500 per month . This makes investing lot easier and very favourable among the small investors.

Last but not the least even though the fund amount is small, your fund is managed by professionals who know the market . Thus for many of us who do not have the desired expertise and are too busy with our vocation to devote sufficient time and effort to investing in equity, mutual funds offer an attractive alternative. 

Systematic Investment Plans

I bet you people must have heard about Systematic investment plans! there is no way you should not have! I mean they are the apple eyes for all investors in down markets. In case you are still ignorant about these and how they work, don't be remorseful! Because starting from this post, let's make some effort in understanding what are SIP's and how they operate! 

So let's start with basics! What are Systematic Investment plans?

Most investors run this serious misconception that SIPs are a sort of mutual fund. Well, if you also took it that way, then don't be mortified! Systematic Investment Plans ( SIPs) are actually a mode to invest in mutual funds! It is a method through which you keep on investing in mutual funds.

More so like the recurring deposits, these are actually a commitment by the investor where he agrees to to invest a predetermined sum of money for a predetermined period of time, in mutual funds.

How does systematic investing work?

Let's assume that you are committed to invest Rs. 5,000 in a SIP every month. Now what happens is that this particular amount is used by the mutual fund company to buy units of stock from the market every month. this keeps on adding to your portfolio every month and thus with every subsequent investment, more and more  units of different Net Asset value ( NAV) build up your portfolio.

So how does it help you? Well the logic is quiet simple. In falling market situations, you tend to add more units to your portfolio. Similarly in rising markets your risk is minimized. This tendency of giving the benefit of cost averaging makes, SIP the best option to scout for in volatile market situation where you cannot predict any thing.

Why? Well it's pretty logical! parting with Rs. 5000 every month might not pinch you but when you think of investing Rs. 60,000 at one go, it simply hurts. Ain't it? That is exactly why SIPs are easier than one time investments.

That's all for today.We will discuss more about SIPS in the successive posts that will be following this post! 

How to Invest in gold

In continuation with the earlier post, let’s discuss today, how do you invest in gold. But before that a quick retribution for all those skeptics who feel that price of gold has touched exorbitantly high ceiling and is due for some good bashing in the coming future! Well, the truth is completely contrary, in fact. It is the general opinion of the experts that gold is the best vehicle available in the market to bet your money on and it would not be a couple of years so before actually you find some sort of correction in its prices!

So friends don’t think a while before you decide to take a plunge and add the luster of the metal to your portfolio! Now having decided to invest in gold, the question that comes next to mind is how are you going to invest in these vibrant yellow metal pieces? Well! Follow the post for your answer

1.       Jewelry -  Well, this the most preferred route to buy gold. And has been practiced since ages too. All that you need to do is walk into a neighborhood jewelry shop, locate your ornament and buy them. Though there might be loss of value due to impurity and making charges, there cannot be a easier way to invest in gold.

2.       Gold bullion bars – Hmm…So what makes these bars appealing? You are correct…their purity. Generally these bullion bars are purer than the ornaments that are sold in the shop and are bereft of any shortcomings like making charges…And like jewelry; you can buy them in shops along with banks. You can always bring them in denominations of 10 grams and 20 grams and be secure about their value as they generally fetch better prices in the market.

3.       Gold Certificates – Okay! So you already have substantial amount of gold ornaments in your kitty. Then go for gold certificates! It’s fairly simple – take your jewelry to banks and deposit it with them!  Now you can enjoy a steady amount of cash flowing in from them as interest money that can be somewhere between 3% - 5%. What’s more you have just made your gold proof from theft and secured yourself a steady income too! A win-win situation! Ain’t it?

4.       Gold ETF : - Often Called Paper gold, Gold ETFs are open ended mutual funds that are listed on the stock exchanges Investors are assigned units of the mutual fund where each unit often represents one gram of gold. Gold ETFs follow the price of gold in the market and their returns thus match the returns of gold you would buy off-line. You can buy and sell them on the stock exchange. You can buy gold ETFs if you have trading account with the brokerage houses. If you don’t have then do it today and start enjoying regular flow of money from your gold.

Having known the various ways, you can put your money on gold, what do you think is the best way that is going to work for you? Well do a complete evaluation of your financial needs and constraints before taking a decision. 

Right Time To Invest in Gold

It's a time investors hate. While inflation graph keep on moving northwards, the stocks are continuously hitting southward. Investors today are bereft of any major option to build their portfolio.

At such times,gold gives you the best solution to invest your money without loosing your sleep. Investing in gold is an option that is not only tempting but also financially wise. the reasons are many

1.Gold is a strategic asset. Even in situations where currency of a country loses acceptance, gold still retains its value.

2.Gold provides diversification to the portfolio and it is not correlated to other assets . So while the prices of stocks, real estates move with the markets, gold's price to a large extent remain unaffected.

3. But the most important reason for you to invest in gold is that it has been doing good in recent years and has provided good appreciation to its investors.

4. It's easy to buy and sell - Gold are relatively easy to buy and similarly easy to sell. Even if you take the ETF route, there is lot of convenience in buying and selling of gold.

So if you are thinking where to put your hard earned money, this is the time to take the plunge. Invest in GOLD!