Grow your wealth

Why SIP is lucrative investment opportunity during falling markets

Unlike investments in stock markets, SIPs give you more 'risk free' profit with the same amount. Here's how? 

Why SIP is lucrative investment opportunity during falling markets

SIPs are Systematic Investment Plans, which are an investment strategy by different mutual funds to the investors. This is a very easy and convenient process of investing allowing investors to invest a small and a fixed sum of money regularly in their mutual funds. Therefore, money is debited from the investor’s account periodically in SIPs, which gets invested in the mutual fund of your choice. You can spread your investment over time with SIP, and also can increase the amount or discontinue investing in the plan whenever you wish to.

Mutual Funds are shares of different companies, maybe 100 companies, and with your investment in SIP, you are investing a little in all of these companies. With SIPs, you are forced to set aside a sum at regular intervals, this money helps individuals with financial discipline in the long run. It’s a long-term investment providing safety, especially during the crashing markets.

With SIPs, every time your money is debited from your account it is invested in mutual funds, you purchase a certain number of fund units corresponding to the amount you invested. When the markets are down you purchase more fund units while you purchase fewer units when the markets are surging. Thus, you are benefited from both bullish and bearish market trends. Therefore, SIP is an opportunity for investors.

Suppose you invest Rs 5,000 in the mutual funds having 100 companies, those Rs 5,000 will be distributed among those 100 companies. Hence, it’s risk-free, because even if the markets crash all the 100 companies cannot go down in a single day, that’s why SIPs are said to be good, and an amazing option of investment.

How SIPs are profitable?

If the markets are crashing, it is believed that one should invest even more. Investing during market losses has chances of double returns in the future, as advised by financial experts- “buy your shares when the prices are low and sell them when the prices are high.”

For example, if you bought a share of some X company for Rs 100. You bought 100 shares of them In Equity. The price of your X share won’t change until you buy it again or if it goes down.

But with SIP, the scenario is a little different, with the same Rs 100 or even a little less money you can have more profit. How? 

Suppose its Rs 10 per share, and you bought 3, so you spent Rs 30 first month, the next month as the market was down with the same Rs 30 you got 12 shares, and the next month the market even declined further therefore, you got 15 shares for Rs 30. Now, the culmination of all your share in SIPs is 30 shares which are more than what you invested in Equity.

Therefore, SIPs will never be bad in terms of an investment. It helps individuals with greater returns in long term. Although it’s natural that your fund will experience both profit and loss from time to time. But the trick is to stay invested as long as possible to make your money grow, as SIPs help in both market cycles- during profits and during losses.

Click on the link to know how to open SIP account online