Are You Looking to Invest in SIPs? Better Check This Out Before You Do!

Equity mutual fund schemes have seen an addition of about 43.44 lakhs new SIPs during 2015, a nearly 66% increase on a year-on-year (y-o-y) basis, says an article published in The Economic Times in January 2016. If you are involved in share trading in India, then you must aware of SIPs. Systematic Investment Plans let you make regular contributions towards a mutual fund (MF) instead of a heavy lump-sum amount in a particular year. The biggest advantage of investing through this channel is that you get to start with as less as Rs 500. This has opened up newer investment avenues even for those with less surplus cash.

Investment Mistakes to Avoid

Systematic investment plans are considered to be an effective tool for wealth creation. It comes with the added advantage of compounding and rupee-cost averaging. Although it has huge plus points, investment errors can limit the power of an SIP and ultimately the expected returns. Here are some mistakes that you must avoid while making share market investments through SIPs.

1.      High Amounts of Investing – Lured by the benefits of the plan, you might end up committing to a higher amount as monthly contributions. However, this might prove to be a problem when you are unable to pay the same in future due to increased financial responsibilities. Therefore, you must analyse not only your present financial condition but also future surplus cash flow, responsibilities and goals in order to decide the optimum amount that you can contribute towards this scheme every month. You can increase the said amount anytime you wish to.

2.      Investing for a Short Time – You can best reap the benefits of SIPs only through long-term investing. Durations of even one year could be too short to tide over any volatility in market movements.

3.      The Scheme is Best for Small Investors – Although the scheme lets you contribute towards a mutual fund with as little as Rs 500, that does not imply that it is only for small investors. You can invest in the scheme with Rs 5,000 or any other amount. The basic essence of the scheme is consistency and not volume.

4.      Discontinuing the Scheme in Bearish Markets – You might discontinue your plan driven by market volatility. However, through an SIP, you can benefit even during falling markets. Rupee-cost averaging lets you buy more units at the same price when the prices are low and vice versa. Because investments are made at regular intervals, this decreases the average cost of investment in the long-run.

5.      Choosing Dividend Over Growth – A lot of people may choose to benefit through dividends. However, the longer you leave your money invested and larger you invest, the more you gain. Thanks to compounding.

6.      Not Monitoring the Scheme – Every mutual fund behaves in a different manner, which makes it essential to monitor and act accordingly when it comes to SIPs. You cannot invest and forget and then expect to reap high returns. 

If you have signed up for portfolio management, you can ask your fund manger about investing through SIPs.

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.

share trading in India

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.