SIP route works well in volatile market conditions

The volatility in the markets has once again underlined the relevance of SIP as a safe route for investors.
If anyone had doubts about the relevance of SIPs (systematic investment planning), it is sure to have disappeared by now.

The volatility in the market has touched a new high in the last couple of weeks, and hence, SIP is one of the few options which can insulate an investor from huge negative returns in the coming days.

For those who are still wondering why SIP is a better option in the current market place, here is a brief outline.

Does it ensure safety?

The question is how SIPs can ensure safety in a market which is swinging across a wide range. SIPs allow you to buy into the market at different price points unlike lump sum investments where the skill of timing becomes more crucial to get maximum returns.

 Since no market participant has perfected the art of timing the market, it would be safe to assume that long-term investing is a better way of building wealth.

What has also compounded the problem is the uncertainty surrounding the market. For instance, when markets were on a roll, everyone was convinced that India had little to worry about - its growth prospects or the effects of the US mortgage crisis.

It seemed as if nothing could go wrong with the sentiments which had touched euphoric levels. In less than six months, the sentiments had taken a complete beating and even at a time when the Sensex is adding 800 points to its kitty, the mood is not exactly euphoric.

If uncertainty has increased the volatility, it has also thrown up investment options at regular intervals for investors. Unfortunately, the task of investing in the market at every dip is not easy as markets have tended to swing in a wide range even during the day.

Categories: Dividends, investment, Mutual Funds, News, NFO, Offer document filed