What is better than an SIP? Adding another!

Equity markets tend to fluctuate between high (overvalued) and low (undervalued) levels. While the objective is to buy when levels are low and sell when they are high, it is difficult to do so on a consistent basis.

Against that backdrop, Systematic Investment Plan, or “SIP”, has been considered a transformative tool for wealth creation in the long term and preferred mode of savings for individual investors. Over ₹17,500 crore worth of SIPs were processed in the month of December 2023. There are various reasons why an SIP could be an effective tool for wealth creation, those being:

> Captures the average despite the volatility in equity markets

> Initiates a long-term approach to thinking

> Frees you from the cycle of greed and fear, helping you manage your emotions effectively

> Leads to higher investing discipline with little impact of various market events

Is my job “done” by starting a single SIP?

Keeping the potential benefits of SIP in mind, why should you stop at one SIP?

> Wealth creation / preservation is a life-long journey and it requires more than a single SIP.

> Adopting a ‘portfolio’ approach to investing can reduce asset / company / sector specific risks, and is likely to result in a better investment experience.

> If you have a single SIP running for long time, it is likely that your income levels and future aspirations have gone up since you started your SIP. This is a situation warranting “Addition of an SIP”

You can opt to diversify by allocating:

> Across different asset classes (Hybrid Funds)

> Across Large, Mid and Small Cap segments

> Across different sectors / themes

> Across different styles (Value / Growth)

> Across different fund management styles

By adding an SIP, your portfolio is likely to be better diversified with a balanced exposure to all assets classes / market cap segments. Having said that, your financial situation and preferences may differ from that of another investor. In that light, it is prudent to consult your financial advisor before making any investments.

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.