subject: SIP it Slow And Steady [print this page] Think Long-Term Think Long-Term
Carry on with the process irrespective of the market conditions. Equity investments, irrespective of whether one makes a lump sum investment or through SIP, require long-term commitment. Many investors get panicky whenever the market witnesses a downturn and discontinue the SIP. They need to realise that a falling or a volatile market benefits them in the long run as they get more units for the same amount. Therefore, it makes sense to continue investing by ignoring short-term volatility.
Raise The Bar
Increase the amount of SIP as the income levels rise. Though it is necessary to be conservative at the start, it is equally important to increase the monthly contributions as your income level goes up. So, while on one hand it will ensure that you avoid wasteful expenditure, on the other you will give yourself a chance to have a bigger corpus in the future. In case you increase the number of SIPs, make sure that these have different investment dates so as to benefit from the volatility during the month.
Performance Counts
Invest in diversified equity funds. A good quality equity fund is likely to do well steadily over time, overcoming most temporary setbacks. Therefore, the focus should be on diversified funds as they are best suited for long-term investing. While selecting funds, the focus should be on their performance and the risk taken to deliver those returns, consistency in the investment strategy and the level of diversification. If you find it difficult to select the right funds, take the help of an advisor who can recommend funds on these parameters.
Check The Options
Growth' option provides power of compounding. Choosing an option is as important as selecting a good fund. Therefore, consider various aspects related to tax, rebalancing and time horizon before deciding one. Since the objective of investing through SIP is to build wealth over time, the growth' option improves the chances of success as it offers a compounding effect. Remember: A disciplined investment approach coupled with a long-term outlook can not only make you a better equity investor but also go a long way in ensuring success.
