While investing in a debt fund normally assures you of fairly consistent returns, equities have the potential to create wealth. But the unpredictability in equity funds can be quite a deterrent when you make a choice. To combine the best of both worlds, there is another plan in the market called Systematic Transfer plan.
Under this plan Investors invest a specific amount for a continuous period, at regular intervals. By doing this, the investor has the advantage of rupee cost averaging and also helps him save compulsorily save a fixed amount each month. When you opt for SIP, you automatically participate in the market swings. Yomaur amount of investment remaining the same, you buy more number of units in a declining market and less number of units in a rising market so that you do not panic in turbulent market conditions. As said earlier, SIP results in rupee cost averaging, which means that, when you invest consistently the same amount at regular intervals, your average cost per unit will always remain lower than the average market price, irrespective of how the market is - rising, falling or fluctuating. Where as this will not be true for a one-time investment. An SIP investor gets phenomenal rate of return compared to a one-time investor.
It is very easy to become a systematic investor. All you need to do is plan your savings effectively and set aside some amount of money every month for investing in a fund - ideally a diversified equity fund or balanced fund, since SIP is a long-term investment plan. The procedure involved is also very simple. All you need to do is, give post dated checks to the fund house. There is another advantage for the investor. He is at a liberty to enter or exit from the scheme whenever he wishes to, depending on the market conditions. So, if you want to stay calm and sail smoothly in turbulent times go for Systematic Investment Plans.
