Investment Planning

Negate the need to time the market â€" SIPs negate the need to time the market. In timing the market, one can miss the larger rally; one may stay out in a bull phase or may enter when the market is slipping into the bear phase. Investing at regular intervals ensures that one has invested both at the high and the low points of the market. It also helps in averaging out the cost per unit called as ‘rupee cost averaging’.

For example, with Rs 1,000, one can buy 50 units of the underlying asset at Rs 20 per unit or 100 units at Rs 10 per unit depending on whether the market is up or down. More units are purchased when markets are down and fewer units when the market is up, which averages the cost. The longer the time frame, the larger are the benefits of averaging.

Inculcates discipline â€" With SIPs, investors can invest small amounts regularly compared to lump-sum investments which may be impacted by market timing.

Lighter on the wallet - SIPs help investors to choose an investment amount that is within their financial means. This is mainly true for SIPs in mutual funds, which can be as low as Rs 500 per month.

  • Market Overview by
    Mr. Navneet Munot,
    CIO, SBI Mutual Fund