Systematic Way Of Profitable Investment: The fluctuations in the market usually bother investors a lot. When the market went up, the investors were happy, when it came down, the lines of worry emerged on the forehead of the investor. Usually, something similar is seen. In particular, investors who invest directly in the stock market or invest in equity funds are very concerned about the turmoil in the market. But there are also very easy ways to save them from this worry and to convert the market hiccups into profits. These measures have been tried for many years, Systematic Plan for Investment and Withdrawal. This systematic or systematic strategy of investment can be broadly divided into three parts.
- Systematic Investment Plan ie SIP
- Systematic transfer plan i.e. STP and
- Systematic withdrawal plan ie SWP
Systematic Investment Plan ie SIP
As the name of SIP implies, it is a systematic system of investing money in the market. Instead of putting all your money in the market at once, you divide it into several parts and invest at different times. By the way, if you want, you can also adopt a strategy like SIP to invest in your preferred shares through your demat account, but usually SIP is only mentioned in the context of mutual funds. Under this strategy, a fixed amount is invested in your favorite mutual fund every month, every week or every day. Another advantage of SIP is that there is no need to worry about raising lump sum capital to invest in it. You can invest a small amount every month according to your income, and you can also increase the amount as per your income in future. Those who invest in equity funds get the most benefit of this strategy. Why we will understand this further.
Why is it beneficial Investment through SIP
The biggest advantage of investing in SIP is that you avoid the worry and confusion of putting money in the market at the right time. In this you do not have to think that you are not spending money at the wrong time? Nor is it a worry that you are going to go over-valued, or to a higher altitude, by putting money in the market and not going to sink your capital? You do not have to grapple with these questions when investing through SIP, because when you invest capital in piecemeal, at different times instead of investing at one time, your investment is never at the top level and Never at the bottom level.
When you keep doing this from month to month or week to week for a long time, then the cost of your investment i.e. cost gets averaged. If the market is low at the time of investment, then you get more units or shares in the same amount of money. At the same time, when the market is high, you buy fewer units or shares, due to which your risk is also limited.
All the statistics show that if you invest for a long time in a disciplined manner through SIP, the risk is low and the profit margins are more likely. This strategy is more important in the investment of equity funds, because there is more turmoil and average returns are also higher there. Debt funds have very small fluctuations anyway, so SIP is not very important to invest in them.
Systematic Transfer Plan i.e. STP
Like SIP, a systemic transfer plan can also be an important part of the investment strategy. It can be used when you have a lump sum fund available for investment, but you want to invest it through SIP to take advantage of averaging. In such a situation, after adjusting the entire amount of interest and inflation, you can usually keep it in a safe debt fund instead of a savings account that gives negative returns. After this, you can give an instruction to transfer a certain amount every month from this debt fund to your preferred equity fund. With this, you will get the benefit of SIP, as well as the transfer of the entire amount in a systemic way, the debt fund will also get better returns on it.
Systematic withdrawal plan ie SWP
SIPs provide you with a better and less risky way of investing money in the market. But the risk is not only when investing money in the market. Many times, even when withdrawing your capital from the market, there is the worry of the timing being wrong.
If you suddenly need money in emergency, then you will withdraw your money without thinking of anything. But if you want to withdraw money for a certain purpose like marriage, education, or retirement under a pre-decided plan, then you will definitely want to withdraw money at a time when the value of your fund is the best. It is natural to be confused that lest the market kept on waiting when the market was at a height, and when the turn came to withdraw money, the market came down.
But it is almost impossible to decide what is the right time to withdraw money. Surely no one knows when the market will go up and when it will come down. In such a situation, to avoid the confusion of choosing the right time to withdraw money, you can take the help of Systematic Withdrawal Plan i.e. SWP. Just as money is invested every month or week in SIP, similarly through SWP, you can withdraw the entire amount month by month by dividing the entire amount in several installments. In this too, you will get the benefit of averaging like SIP and you will avoid the risk of withdrawing the entire amount at the very lowest level of the market.
Along with SWP, you can also take advantage of STP
Yes, one more thing, during this time you can also use STP if you want. But in reverse order of the example given earlier. That is, money from equity funds should first be transferred to debt funds with low volatility and better security and then withdraw from there through SWP. You can decide which strategy will be right for you according to your needs and goals.
So using SIP, STP and SWP in this way, you can take full advantage of the better returns in the market, that too by facing the least risk. Yes, remember this much that all these benefits will be given only when you choose the right funds for investment.