Investment Advisor: How Does an SIP Help in Investment Management

Investments in mid-cap funds via an SIP yielded larger returns than large-cap funds from 2010 to 2015, says an article published in The Economic Times in August 2015. SIP is that tool that lets you diversify your investments over a long period of time. It is a structured route that lets you contribute towards your mutual fund(s) on a regular basis. Much like mutual funds help to hedge stock market risks through portfolio diversification, SIPs help you tide over market volatility. They also help inculcate the habit of saving and bring discipline to your investment. Your investment advisor may advise an SIP if you are a beginner and cannot invest a large sum of money in various schemes or if you are saving for a long-term goal, such as child’s education and marriage or for your retirement corpus.

How Does an SIP Work?

Through this tool, you can contribute towards the mutual fund on a monthly, quarterly, half-yearly basis and so on. Since its launch in India in 1997, a host of plans have come up, including one that lets you invest daily. All you have to do is instruct your bank for auto-debit. A certain sum of money is auto-debited from your bank every month on a pre-set date. This money is now used to buy units of the mutual fund(s), you wish to invest in. The purchase takes place at the net asset value (NAV) for the day. More units of funds are bought each month and transferred to your demat account. This practice lets you buy fewer units when the prices are higher and more units when the prices are low. This lowers the average investment cost per unit in the long-run. This is called rupee cost averaging.

Benefits

SIPs allow you to tide over market volatility through rupee cost averaging. They eliminate the need to time the market. Unlike traditional share market investments, which were done during market peaks, you can invest through an SIP both when the markets are rising and when they are falling. In case of rising markets, you benefit from the high value of your fund units. On the other hand, in case of a falling market, you buy the same units at a lower price. It is ideal for long-term investments, since it helps you maximise the power of compounding and rupee-cost averaging. The more money you invest, the more it gets compounded. Contributions are made in open-ended schemes, therefore you can exit and withdraw your money any time you wish you. You can also increase or decrease the amount you wish to invest anytime, with the right suggestions from your investment advisor.

Returns

An SIP is one of the most appropriate tools for investment management. It helps to build a significant corpus. You can calculate the expected returns from an average monthly contribution over a period of time at a certain interest rate through the SIP calculator available online. You can also check the ranking of a fund online before investing.

Demystifying Investment Management, Portfolio Management

Investors all over the world have long known that all their eggs should never be put in one basket. To further underline the case for diversification, an article in Forbes, published in February 2015, showed how big and small investors alike who failed to appropriately diversify, found themselves caught up in the “financial hurricane” of 2008-2009. In fact Fidelity Investments explains that the main objective of diversification is not to ensure better performance for your investments but to improve returns for your specific level of risk tolerance. This is where investment management services and professional services for portfolio management and share trading in India come to the rescue. However, many of us are filled with doubts and uncertainties when we think of enlisting professional services. To help you make an informed decision, here are the answers to the most commonly asked questions in this arena.

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Top 3 Investment Management FAQs Answered

1.    Why do I need an investment manager?

To ensure financial security for yourself and your loved ones and to plan effectively for life post retirement, you need to invest today in the right vehicles. However, how do you know what options are best suited to your risk appetite and your financial goals? This is where an investment manager comes to the rescue. An experienced investment management professional will be well versed in the best strategies for investment, while keeping himself/herself updated on the market situation at all times. They have the still to analyses your current finances and then help you choose the best assets or options for share trading in India, in accordance to your life goals. They also maintain utmost discretion while handling your finances and monitor progress to ensure that you get the maximum benefits.

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2.    Why would I need professional investment management?

With the unprecedented amount of information and financial calculators available online, one might wonder why professional investment services are still needed. The reality is that research demonstrates that the track record of individual investors is far from encouraging. Professional investment managers have both the skill and the experience that a layperson might lack. They will be able to see loopholes, assess your risk tolerance and suggest the best options for you depending on your life goals. In addition, they will take care of all the legalities, while ensuring that your tax exposure is minimized. Also, investment management services are well worth the fees, given that they will continuously monitor and modify your portfolio to bring you the best results, while all you need to do is lay back and enjoy the benefits.

3.    Are my assets safe from theft, unauthorized withdrawal and custodial bankruptcy?

Although your portfolio manager would have the discretionary authority to invest assets on your behalf, they do not have the actual physical custody of the assets. All your investment holdings will be kept sage with the bank or financial institution. This adds a layer of security since the custodial responsibility is segregated from the management of the portfolio. You retain the right to grant power of attorney to those you whom you want to give access to your assets. In addition, the best financial institutions will also have their own risk management system and internal control that ensure that there is no unauthorized access to your assets.