Equity SIP: A New Age Tool For Higher Return
We have learned about mutual fund SIPs in our previous blog. MF SIPs are ranked by the investors among the top investment tools available in the market because of their higher gain aspects, bearing lower amount of risks than others. Equity SIP is relatively a new concept in Indian investment scenario but is gradually gaining popularity among investors. This is all about getting the best from the equity market through a systematic investment plan.
Understanding The Concept
Equity SIPs are almost similar to the Mutual Fund SIPs. The only difference is unlike a mutual fund, in Equity SIPs, you invest in a single equity stock rather than a pool of stocks. Here you choose the frequency of investment and the amount or the quantity of the stock you want to invest. An automated deduction from your bank account arrangement can be made through your broker or online trading account. For example, you can instruct your broker to invest on behalf of you in 100 equity shares of Company A on every 5th day of the month say for next 12 months. Here you are buying shares at regular intervals just like mutual funds from stock exchanges like BSE and NSE.
Why Choose Equity SIP
The answer is simple, lump-sum equity investments are for veterans and Mutual Fund SIPs are for kids, but Equity SIPs are for smart men. Jokes apart, Equity SIPs are made to earn like equities, but to bear losses like Mutual Fund SIPs. That means more returns with lesser risks. Let’s find the points to support our decisions to go for Equity SIP.
1. High return:
In terms of return, there is no match for equity investment. A successful investment in equity shares has a normal tendency of luring potential investors but comes with a baggage of high-risk factor. This risk factor is somehow lowered by SIP mechanism.
2. Less costly:
The concept of SIP is based on cost averaging. That means if you invest in any particular stock for a longer period of time in a fixed quantity at a fixed interval, the cost of buying the equity share would obviously go down, inversely the profit will go up at the time of selling.
3. Wealth accumulation:
With a regular amount of investments, you accumulate a large amount of wealth. If you invest in Equity SIP of a blue-chip or a reputed company’s share for a long-term perspective, there is a strong possibility that your returns will be overwhelming.
4. Beneficial for small investors:
As we know investing in equity shares is not a cup of tea for small investors, here is an excellent opportunity for them. Investing a small amount in an equity share in lump-sum may not have a significant effect on return, but Equity SIPs have.
5. Beat the timing:
A crucial matter about investing in equity shares is about the timing of the investment. You should keep vigil about the market fluctuations and choose the right time to buy shares. In the case of SIP, you can mitigate the timing losses through cost averaging.
6. Real-time transactions:
Equity investment with SIP mode gives you the ultimate edge in tracking your profitability on a real-time basis. You can judge your investment quality every moment and free to take steps on your investment whenever you like.
How To Choose The Shares For Investment
Well, you decided to go for Equity SIP, the very first question arrives in your mind which company’s shares to select for investment? The thumb rule is to go for the companies you want to own if given a chance.
Mostly large-cap shares are quite suitable for Equity SIP investment. At the same time, one should analyse their previous track records. If a company’s share despite having good numbers staying low in the market, there are good chances that the company’s share may go up. It would be an effective sip policy if someone goes for blue-chip share like SBI, Reliance, TCS etc. Because these type of companies have proven track records and have abilities to come out of different eventualities.
The investment strategy through Equity SIP is gradually gaining space among the investors. In fact one of the best investment opportunities to multiply wealth with minimised investment risks. One important aspect to be kept in mind that you need to study things deep to reap out the maximum profit out of it, else things may turn out to be an unpleasant investment experience for you.