Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Systematic investment: The way out? - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Jan 12, 2006

    Systematic investment: The way out?

    The markets are at record highs. Foreign Institutional Investors (FIIs) continue to pump in record amounts of money into the Indian stock markets. In CY05, the FII investments totalled an all-time record US$ 10 bn+. In fact, even in the first week of January 2006, FIIs have already pumped in US$ 600 m. India-dedicated funds are being launched in countries as diverse as Japan and the UK. Therefore, it does not seem that the fund flows are going to end in a hurry.

    Thus, this is the driving force for the markets hitting and staying at such high levels. In such a scenario, what can investors do? One possible way to counter volatility in the markets is investing through a systematic investment plan (SIP). Though generally used in mutual funds, this concept can also be applied to individual stocks.

    What is an SIP?
    An SIP involves putting fixed sums of money at regular intervals into a particular mutual fund/stock. This concept is used extensively in mutual funds. There are a few advantages that this style of investing offers. It does away with the need for lump sum investing. An investor can build wealth over a period of time through investing relatively small amounts over that period. An SIP harnesses the power of compounding. As you invest fixed sums of money, even small amounts, each month, over a period of several years, the corpus builds up significantly. Provided you have invested in the right avenues, the compounding effect takes place and one's investments can grow to substantial amounts, with the right amount of patience.

    Investing in an SIP also does away with the need to time the market. It reduces the risk associated with market fluctuations. Probably the most important feature of investing in an SIP is the fact that it inculcates discipline in investing. The legendary investing guru, Warren Buffet, has often said, and rightly so, that the number one enemy of an investor is the investor himself/herself! This is because investors tend to get swept away by emotions and thus, more often than not, end up making hasty decisions. The need to discipline oneself cannot be underestimated.

    It can be said that investing through an SIP is a sort of passive investment strategy in the sense that one does not need to worry about the daily fluctuations of the market and, in fact, one can use them to one's advantage. However, we must mention here that his is not necessarily a guaranteed way of making profits. Any investor must look primarily at the fundamentals of the company before putting his or her hard-earned money into the company's stock, either through a lump sum or in a systematic manner. Fundamentally strong companies with impeccable, high-caliber management teams, difficult-to-replicate competitive advantages and strong growth prospects must be the primary candidates for investment.



    Equitymaster requests your view! Post a comment on "Systematic investment: The way out?". Click here!


    More Views on News

    How to Ride Alongside India's Best Fund Managers (The 5 Minute Wrapup)

    Jun 10, 2017

    Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.

    How To Read Your Mutual Fund Account Statement Correctly (Outside View)

    Aug 17, 2017

    PersonalFN simplifies the mutual fund account statement for you.

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process) (The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    Which Gods Will Bring Down the US Empire? (Vivek Kaul's Diary)

    Aug 17, 2017

    Mr Trump is in the White House and the gods are in their heavens; what's not to like?

    Will They Haul Off Trump's Statue, Too? (Vivek Kaul's Diary)

    Aug 16, 2017

    All across the country, the old gods become devils. New, gluten-free gods take their places...

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 17, 2017 (Close)