It is standard joke in the market that individual investors are always late comers. They enter the market when it is historical high and they exit when it really hits a low. But if anyone wants to make money from the stock market than they should do exactly opposite. Means they should buy when the market is low and sell when it is high.
But practically this is not possible. ‘Buying Low & Selling High’ is an easy to understand logic but very difficult to apply. Because when the market hits all time low, it is very difficult to control your fear and buy the stocks. And exactly reverse is also difficult means when the market hits all time high, it is really very difficult to control your greed and stop buying.
So What is the solution of this problem? Means how can we control over emotions and invest our money when the market is low and exit when the market is high?
Well, The answer is SIP (Systemic Investment Plan).
A Systemic Investment Plan (SIP) allows you to buy more units when the market is low and it will automatically prevent you from buying more units when the market is high. Suppose you start SIP of Rs. 10,000 (US $ 200) per month in some Index Mutual Fund. Now when the market will be low, you will be able to buy more units from your money each month and when the market will be high, you will be able to buy very less units from your money. So SIP will help you to control your 2 main emotions – GREED & FEAR…!!!
Not only this but in the long run, The SIP will do Rupee-cost-Averaging (Dollar-Cost-Averaging) and bring down your average entry level into the market and thus the higher profit. Here are few advantages of SIP.
- It Imparts Financial discipline to life
- You can Start investing with a small amount
- You Invest irrespective of market conditions
- Cost Averaging will bring down the purchase cost
- It will enhance the possibility of better returns.
Author: Asav Patel
Article Source: EzineArticles.com
Provided by: Canada duty rate
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