1. For most individual investors, it is downright dangerous to be investing a large amount of money in lump sum in the equity markets because the risk of mistiming your investments deprives you of benefiting from the market for many years.
2. If someone gets started through a lump sum investment and ends up losing money, he would keep away from equities for a long time.
3. Hence, even at the cost of losing an opportunity, one should stagger their investments and spread it over at least 6-8 months, because if the market goes down by even 15-20 per cent after you have made your lump sum investment, you will start looking at equities in a very negative way.
4. Systematic Investment Plans (SIPs) help one benefit by averaging out the cost of acquisition and through the power of compounding over time, besides helping you to manage your anxiety when markets are on a downward trend.
5. While you can invest a large amount in Equity-Linked Saving Scheme (ELSS) funds at one go for availing tax benefits, but the best way to invest is through monthly SIPs.
6. This will curtail the investing risk significantly by averaging out your cost of purchase in the year.
7. It will also inculcate the tax-saving habit throughout the financial year, instead of buying worthless tax-saving instruments in a hurry at the last moment.
8. A lump sum, if needed, can be invested additionally in the last month for topping it up as per actual tax computation.
9. The only exception to SIP investment would be making a tactical investment in a thematic or sectoral fund.
10. Even the best of fund managers could not time the market all the time, so it is quite natural that an untrained retail investor will not succeed too.
11. However, the reality is that a large number of investors feel that they can time their market entry and exit perfectly, but most often end up with disastrous results because there are several factors that influence stock prices (and mutual fund NAVs) which are not always possible to predict correctly.
12. A prudent investment practice is to invest systematically and with a long-term approach, which helps you average out your acquisition cost, avoid timing the market, and get the advantage of the power of compounding.
13. Likewise, in the long run, as the market moves in cycles, it gives you the scope to exit gainfully at different times.
14. After retirement, say, you can start regular withdrawals, either through Systematic Withdrawal Plans (SWPs) or redemption of units, from the same fund(s) equivalent to your weekly/ monthly/ required expenses.
15. All withdrawals after 1 year of investment are tax-free in your hands upto Rs.1 lakh annually.
16. A back-of-the-envelope calculation shows that an investment of just Rs.1,000 per week, out of your NET SURPLUS SAVING, into a weekly SIP of a Balanced equity fund, throughout 30 years of earning life, will give a weekly SWP of Rs.22,000 from it for the next 30 years of retired life.
2. If someone gets started through a lump sum investment and ends up losing money, he would keep away from equities for a long time.
3. Hence, even at the cost of losing an opportunity, one should stagger their investments and spread it over at least 6-8 months, because if the market goes down by even 15-20 per cent after you have made your lump sum investment, you will start looking at equities in a very negative way.
4. Systematic Investment Plans (SIPs) help one benefit by averaging out the cost of acquisition and through the power of compounding over time, besides helping you to manage your anxiety when markets are on a downward trend.
5. While you can invest a large amount in Equity-Linked Saving Scheme (ELSS) funds at one go for availing tax benefits, but the best way to invest is through monthly SIPs.
6. This will curtail the investing risk significantly by averaging out your cost of purchase in the year.
7. It will also inculcate the tax-saving habit throughout the financial year, instead of buying worthless tax-saving instruments in a hurry at the last moment.
8. A lump sum, if needed, can be invested additionally in the last month for topping it up as per actual tax computation.
9. The only exception to SIP investment would be making a tactical investment in a thematic or sectoral fund.
10. Even the best of fund managers could not time the market all the time, so it is quite natural that an untrained retail investor will not succeed too.
11. However, the reality is that a large number of investors feel that they can time their market entry and exit perfectly, but most often end up with disastrous results because there are several factors that influence stock prices (and mutual fund NAVs) which are not always possible to predict correctly.
12. A prudent investment practice is to invest systematically and with a long-term approach, which helps you average out your acquisition cost, avoid timing the market, and get the advantage of the power of compounding.
13. Likewise, in the long run, as the market moves in cycles, it gives you the scope to exit gainfully at different times.
14. After retirement, say, you can start regular withdrawals, either through Systematic Withdrawal Plans (SWPs) or redemption of units, from the same fund(s) equivalent to your weekly/ monthly/ required expenses.
15. All withdrawals after 1 year of investment are tax-free in your hands upto Rs.1 lakh annually.
16. A back-of-the-envelope calculation shows that an investment of just Rs.1,000 per week, out of your NET SURPLUS SAVING, into a weekly SIP of a Balanced equity fund, throughout 30 years of earning life, will give a weekly SWP of Rs.22,000 from it for the next 30 years of retired life.