Systematic Investment Plans - The best way to invest

Almost all the mutual funds offer investments through SIPs (Systematic Investment Plans). As told by most of the experts, SIPs are the best way to invest in mutual funds. The concept of rupee cost averaging is much publicized now a days, which is the core principle that works underneath the SIP route. Systematic investment plans work for the long term, atleast a minimum period of 5 to 7 years should be considered before starting a SIP.

The concept here is, when you invest systematically over time, your cost averages out to give you good returns. Your investment which periodical in nature purchases units of the mutual funds under different market conditions. So, when the market is low, you still invest, buying more units and the market is high, you invest getting low number of units. Over a period of time, which is actually over 3 years as suggested, you get to invest under different market conditions, buying more units when market is low and less units when market is high. So on an average, your cost of purchase becomes low to give you decent returns.

In general, SIP returns are higher if your investments are more during bear markets. This is because you buy more units of the fund, when the market is low. But the fact here is, you should stick to disciplined investing irrespective of the market conditions. This is not as easy as we think. Severe fluctuations in market often result in changing the minds of the investors. This is an emotional factor which varies from person to person.

But one who withstands this mental pressure and is disciplined in his investments periodically is rewarded well. Also, not to forget your investments should still be in well performing mutual funds.

You may consider investing in funds like HDFC Equity, HDFC Top 200, Reliance vision, Birla Sun Life Equity etc.