Mutual Funds – How beneficial is the Systematic Investment route?

You wish you knew the right time to invest in the market. Who would not want to make handsome gains and exit the market making a neat profit in the bargain. But even experts have not been successful in timing the market accurately. Yet, there are ways you can invest wisely with minimal risk exposure. How? Through Systematic Investment Planning.

The systematic Investment Planning method allows you to regularly set aside a given amount on a monthly or a quarterly basis towards an investment avenue of your choice. It could be bonds, mutual funds, debt or any other. Such systematic planning is especially beneficial for those who lack the financial acumen to keep a track of the NAVs to enter the market at the right time. Regularly setting aside a sum on a monthly basis would mean buying certain units of lets say a fund at varying NAVs since the volatility in stock market is high.

For instance, if the NAV has been around Rs 8 for a unit it may fluctuate in the next month and rest at Rs 12. Further on the NAV may be even lower at Rs 5 or it may go up at Rs 13. At each of these fluctuation levels you regularly purchase units and end up buying the units at a reasonable cost thanks to the power of Rupee Cost Averaging. With rupee cost averaging the investor is able to buy units at a lower price compared to the average price of the unit. So what are the benefits of systematic investment planning?

Systematic Investment Planning can take care of inflation since it acts as a cushion absorbing the ups and downs of rising prices. Through SIP the investor gets the benefits of compounding besides the convenience it offers. Also he need not worry about timing the market.