Among the various methodologies of investing, timing the market right is of importance. Investors look to invest in book profits and leave the market. There are some investors who adopt the invest and hold strategy. Some feel that adopting a balanced investment portfolio that is spread across equity and debt asset class is the key such as SIP.
Several methods of investing accrue and retail investors would do a great job if they invest in a consistent manner. Even the choice of the best tax saving mutual fund SIP is not a bad option. A general feeling is that no one can time the market perfectly and no logic exists to be chasing this. In fact the best way to be investing in mutual funds is via a Systematic investment plan also termed as SIP. This is a smart investment plan that helps to accumulate wealth over a period of time. Even you can start investing with a small sum of money and cash in on the power of leverage and power compounding. This is a disciplined approach that would enable you to hold your hedge against any form of inflation. Even if you stick on to the best tax saver SIP there are some protocols to follow while investing in SIP
A disciplined approach to investing in SIP
There are investors who might opt for stock options in order to amass wealth. But to time the market right calls for a detailed analysis and knowledge at your end. Though it can pose to be of considerable risk. But if you adopt a disciplined and dedicated approach to investing you can trim down the risks. The need to actively track down the market is also reduced and a SIP helps you to achieve that.
A simple, easy and even a convenient way to monitor SIP
There is no need to be taking out time from your schedule in order to be monitoring the investments. You just need to fill in the application form, give outstanding instructions in the form of auto-debit or even give out post-dated cheques. The investments can be monitored by periodically checking out your account balances or statement of accounts.
Cash in on the power of compounding
One of the best ways to build wealth is to start early and to invest regularly. Even if you invest a small sum of money on a regular basis it can help you to accumulate wealth. In due course of time, it would enable you to foster a major sum of money based on your own contribution along with the returns compounded over a period of time.
The benefits of rupee cost leveraging
The major benefit of rupee cost leveraging is that there is no need to time the market. Just you need to invest a periodical sum of money over a given period of time at regular intervals. As the amount that is being invested seems to be constant, you end up purchasing more units when the price is less or even purchase fewer units when the price is on the higher side. This contributes to a lower average cost.
Starting early is the key
This helps to create wealth if you start early as you can amass wealth. Even if you witness a 5-year delay in investing it can have a considerable impact on wealth creation.
To sum it if you are looking to generating wealth over a long period of time then SIP is the best foot forward. This appears to be one of the popular secrets for wealth creation. Once you are planning to invest in SIP you need to follow the below steps
- It is necessary that you plan your SIP investments. This could be on a quarterly, monthly or yearly basis as when the prices are low there is a strong possibility of purchasing more units
- Clearly formulate a clear cut investment plan. SIP is going to bear dividends once you have a long term investment horizon. This helps an investor reap in rewards over a long period of time.
Perhaps the most important point to invest in mutual funds is to diversify your investments. Not only it reduces risk but optimizes returns at the same time.