Most people hesitate to invest in the stock market. Even if the stock market does extremely well, investors have mixed reactions. However, it is never too late to start investing in the stock market.
True, stock market is risky. But if you have a sound investment plan and follow it religiously, your investments can reap excellent returns in the long term. People generally shy away from equity because of market volatility. But each day is not the same. Chances are you may lose the opportunity of entering stock markets when conditions are favorable.
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Experts are of the opinion that equity investments yield good results provided:
Investing in equities for the long-term, negates the impact of medium and short term market volatility on investments. If you invest in line with financial goals, there’s nothing like it!
Practice makes perfect. As a newbie in stock markets, you might not know the right time to make an investment. Why not try equity SIPs?
SIPs or Systematic Investment Plans have been gaining acceptance among mutual fund investors. Similarly, you can also buy or invest in equity shares via SIPs. This service is called ‘Equity SIP’ or ‘Stock-SIP’ or ‘ESIP’.
Investors can buy or invest in shares via equity SIPs, index funds or exchange traded funds (ETFs). Like a mutual fund SIP, you can invest in Equity SIPs at varying frequencies: daily, weekly or monthly. This helps in spreading out investments over a period of time, by which investors can benefit from rupee cost averaging. You will soon have created a sizeable corpus with Equity SIPs.
Following are the important points to keep in mind before starting Equity SIPs:
This facility is broker specific, so each broker will have its own rule book. Some brokers have a restriction on stocks available for investment via Equity SIPs to just the top 100 stocks by market capitalization or stocks appearing in an index like Nifty 50.
Investors start SIPs without a thought on the amount they can afford. Many times investors tend to make an over commitment. They find it hard to continue their SIPs. Investments stop and goals are compromised. Therefore, start small and increase the SIP amount once comfortable. Take calculated decisions.
There is a minimum amount of money that you need to invest under Equity SIP. This differs from broker to broker.
SEE ALSO: How To Start SIP Investment?
You decide on the number of stocks you intend to buy via Equity SIPs. If stock prices go up:
You can change the frequency of ESIP. You can pause ESIP if you are facing a temporary cash crunch. You can also cancel ESIP. But these facilities are provided only on committing to a minimum number of purchases. This is generally six.
ESIP requires you to sign a debit mandate in favor of your broker. This allows the broker to deduct the required amount from your bank account.
Equity SIPs give you the compounding benefit. You can achieve goals at different stages of life, if you stay invested for the long-term and re-invest your gains. So, opt for the growth option and avoid taking out yearly dividends.
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