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Showing posts from February, 2016

Things not to do in the volatile market

Don't check the value of your long-term investments on a daily basis Don't stop your SIPs in equity funds Don't try to wait for a market correction to begin investing Don't ignore fixed income if you think there's opportunity in equities, every asset class has its own value Don't begin putting money in equities till you have adequate insurance and reasonable emergency funds Don't overlook tax-saving investments, money saved is money earned Don't ignore equities if you're retired, it's the best way to beat inflation Don't put your money in unit linked insurance plans and such, it's not your duty to make the insurance sellers rich Don't think of gold as an investment, buy it only for consumption Don't invest in sectoral or thematic funds, diversification earns more rewards Don't dabble in stocks directly if you don't have the time, knowledge or understanding of the markets Don't blindly follow everything list

Don't time the markets by stopping and starting SIPs

For what is supposed to be a simple (and simplifying) idea, there are way too many misconceptions about the SIP (Systematic Investment Plan) way of investing.  In general, those who have a punter's approach to investing carry over that approach to SIPs, trying to stop and start SIPs by timing the markets. Back in 2010, I remember investors claiming that SIPs were no good, and that they had barely broken over the preceding years. Generally, these were people who had stopped their SIPs after the crash of 2008, and then restarted after the recovery in 2009. The basic idea behind SIP is that while the general direction of an equity investment is upwards, it is not possible to reliably predict the actual fluctuations that it may undergo as part of its general trend. Instead of trying to time one's investments, one should regularly invest a constant amount. As time goes by and the investment's Net Asset  Value  (NAV) or market price fluctuates, this will automatically ensure that