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Advantages of Investing Money in a Systematic Investment Plan (SIP)

BY: Dave Information | Category: Finance | Submitted: 2010-12-14 21:20:06
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Article Summary: "An SIP is one of the best methods of investment. Read on to know why you should invest in a Systematic Investment plan..."

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There are many different methods of investing money. One of the major methods of investing is parking money in the equity markets. The advantage of investing in the equity market is that the money will grow at a faster percentage when compared to the money that is invested in other modes like fixed deposit bonds. There are various methods in which a person will be able to invest money in the equity markets. One of the methods is the investment of money directly in the equity markets. This is a risky business unless the person who is investing is an expert or unless the person has a lot of time to track the markets and is able to buy and sell at the right moment.

One of the other methods of investment is in the mutual funds. Again, there are different methods of investing in the mutual funds. A person will be able to save or invest money as a lump sum in the mutual funds and the fund manager will be able to buy and sell equities and also invest in other instruments so that the investor is able to reap the benefits. The truth about the ordinary mutual funds is that the investor may have invested when the market was on a high. This causes the person to have a loss if the market loses steam or goes into a bear phase.

There are a lot of advantages when the person is able to invest in the systemic investment plans. Some of these advantages are listed here.

1. No need to time the market:

The problem with most investors is that they try to time the market. The investor tries to buy when the market is low and also tries to sell when the market is at a high. The reality is that even if a person may be able to time the market once, the person will not be able to do it consistently. When investing in the equity market through the systematic investment plan, the person need not time the market as an investment is done each and every month. This means that you will be able to average the cost of purchase of equity over a period of time, even if the market is in a bull or bear phase.

2. Regular investment:

One of the problems with investment is that people are not regular with it. This causes people to spend more and finally end up with saving less money. To make sure this does not happen, a person can be systematic with the investment made if investment is done in the systematic investment plan.

3. High returns:

Since the investment is systematic and is also invested in various instruments, the returns that a person gets from this method of investment is much more than what a person may get as return from other modes of investments. The returns in some of the other investments are quite less, but since the systematic investment is done in various phases of the equity market, the returns are higher than what a person could expect in any other mutual fund investment.

Any person who is interested in making a huge amount of money and also wants to invest regularly should make sure that an investment is done through the systematic investment methods, also known as the SIP.

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