Building Wealth Sip by Sip

What is a systematic investment plan?

A systematic investment plan is when you instruct a bank, an investment company or your financial advisor to buy a particular investment product, usually, a mutual fund at regular interval for an equal amount.

Systematic investment plan have proven to be the best and simplest way to create wealth, and here is why.

1) We are not professional investors and cannot spend all day looking at what to buy and when to buy.

We are just normal working people who want a good return on our investment so that we can secure our financial future. Since we can’t track of the newest funds that are coming to the market, and can’t apply to all IPOs it is better to have a fixed amount deducted from our bank account and buy units of a popular mutual fund at fixed intervals, weekly, biweekly or monthly.

2) We cannot time the market.

It has been proven time and again that even the shrewdest investors cannot correctly predict the peak and bottom of a stock price. And people who try to time the market ends up buying at high price and sell at a lower price. As an SIP investor, we need not bother about buying at highs or lows. Since we are buying at regular intervals, we will get the desired stock at an average price. Eg: if we buy 1 unit one a mutual fund for 2 dollars this month and again buy another unit next month for 4 dollars, the average price becomes 3.

3) Stocks have given the best returns on a longer term.

The stock market may move or down at every whim and fancy, but history have proven that, if held long enough, stock investing has given the best return. By investing in an SIP, you will definitely make a good return on your average price.

4) Disciplines investment will make sure we save every month.

More often than not, we try to procrastinate when it comes to investments and savings. More so if the amount to save is substantial. By spreading your investment, the amount is not too big as to hurt your monthly budget and the disciplined approach to investing will make sure that you have made some investment every month or week.

Author: Bob Brahm
Article Source: EzineArticles.com
Provided by: Cool mobile gadgets

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