Benchmark indices are in the red these days. The BSE Sensex has shed 15.23% since it reached its 52-week high of 62245.43 points. It is currently trading at 52762 levels. Further, the NSE Nifty has also slipped 15.30% from its 52-week high of 18.604.45 points. It is currently trading at 15758 levels. The markets are weighed down by interest rate hikes by central banks, soaring inflation, the ongoing crisis in Russia and Ukraine and foreign fund outflows.
Equity mutual funds have been witnessing a positive momentum for the past 15 months. They have attracted a net sum of ₹ 18,529 crores in May amid heightened volatility in the stock markets and consistent selling by Foreign Portfolio Investors(FPIs).
At this point, many investors are considering investing in SIPs. SIPs or Systematic Investment Plans are investments that are done regularly, over a period of time to generate returns.
SIPs help in rupee cost averaging. This essentially means that a fixed amount of money is invested at regular intervals, irrespective of whether the markets are up or down. This helps in buying more units when the markets are low and buying lesser units when they are high. This approach brings down the average cost per unit, over the long term.
Right now, it is a great time to invest in SIPs. The markets are down, therefore mutual fund investors can accumulate more units for a fixed amount. In fact, many investors that are rich on cash at this point are making lump sum investments to gather more units at a lower cost per unit.
Here are a few reasons why it is the right time to invest in SIPs
With SIPs, investors do not have to worry about missing out on gains when the markets are up, nor do they have to worry about having to sell when they’re down. They just have to invest a predetermined amount on a regular basis and compounding will work its magic in the long term.
SIPs help investors to diversify their portfolios, by spreading investments across various asset classes like stocks, bonds, mutual funds and more. This would not be possible if investors would invest in a particular stock or asset class by themselves.
When the markets are up by a considerable amount, investments made at this point will fetch higher returns since the cost of investment is low.
Written By: Simran Bafna
The content in this news article is not investment advice. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Dailyraven Technologies or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing
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