As a rational investor, we always want to invest in those instruments from where we get maximum returns with minimum risk. Unfortunately there is no such instrument available in the world, that is why we get attracted to risky instrument like equity to get maximum returns.
Actually to earn maximum returns with maximum risk doesn’t mean you win all the time and earn that return. As risk attached with such an instrument is risk of default, which is the biggest risk as compared to the returns we earned. So now what is the solution to this problem? Does it mean that we should avoid such good return instruments? Hold on……I know we all are anxious to know the answer! Of course it is not a good idea to avoid such risk associated instruments because ultimately they may give good returns.
Hence to over come this situation and get the best returns, you can invest in such instruments by the way of SIP (Systematic Investment Plans) in Mutual Funds. It does not mean that with SIP in Mutual Funds you win all the time or SIP gives me more return than direct equity.
Wait!! Definitely SIP may not give higher returns as happens in case of direct equity, but certainly SIP will give returns and you will not lose money. Lets see how. So my advice to you is that don’t play with your hard earned money because though at the time of investing we accept the risk, but it is upsetting to lose money when it actually happens. This way even SIP may not give us absolute highest return but as compared to the risk (we are taking through SIP) returns are good, provided you choose good Mutual Fund and your holding period is for the long-term.
So it is like if you want healthy investment then you must complete the full dose of SIP ( your entire tenure ) to reduce the symptoms of market fluctuations.
We may earn handsome returns in long-term provided that while choosing Mutual Fund we have taken professional advice and have got it reviewed by a professional. So what is the advantage of investing long term? Investment should be made for a longer tenure only because we do not know index will move in which direction. Every economy goes through its ups and downs and markets move accordingly, and it is not a short term phenomenon. To overcome such market movements, our investment cycle should be long term.
This way like for our body’s fitness, regular exercise is important and not just exercising once in a while. For youngsters, heavy exercise instruments like equity Mutual Funds may work well but for not so young yoga like instruments say Debt Mutual Funds, MIP and FMP are good.
Still if you want to invest through direct equity for higher returns then “Best of Luck” but if you start investing through SIP then Party to banti hai dost!….