SIP: Perk of volatile funds in cost averaging

Volatile funds are known to be a source of good returns but they are
prone to even the slightest movement in the market. While the funds earn great
returns in a booming market, the same can incur a severe loss in a low market
phase if invested in the wrong such. A fund that is prone to market changes
demands a good investment tool like SIP to facilitate more earnings.

why SIP should be done on volatile funds for better averaging

Here are somereasons why SIP
should be done on volatile funds for better averaging and investors can benefit
from it:

  • Reduce cost:  Cost averaging ensures maximisation of
    returns and minimises the impact of market volatility. When the market is
    volatile, the funds those are prone to volatility face challenges in the
    market. At such a time, the price per unit of such funds become considerably
    and regular SIP investors take full advantage of the situation by purchasing
    more number of units at low prices. When the market situation improves, the
    prices of the same units soar high; this time the SIP investors sell less
    number of units at a higher price and earn a greater profit on each unit. This
    helps them over time to reduce the average cost of each unit by a great
    difference. Since volatile funds are prone to market fluctuations, in a good
    market they earn great returns while in a bad market their value depreciates a
  • Investment
    Investing in volatile funds is risky and full of uncertainties but the
    SIP investors are under lesser stress when it comes to putting money in such
    funds.The regular activitiesof SIP investments develop its habit in investors
    and help them become more confident and sure about their investments in both volatile
    funds and volatile market. The discipline encourages investors further when
    their regular investment endeavour bears successful cost averaging outcomes.
  • Absorbing market
    Volatile funds generate better earnings than most other funds in the
    investment market but they are also closely associated with market ups and
    downs. The high returns from volatile funds and profits earned through it,courtesy cost averaging help SIP investors ride to out the
    blows of market volatility in a low market phase.
  • Wealth
    Volatile funds are known to bring better returns than most other funds
    and therefore continuous investment in such funds over a stretch of time will
    help investors to accumulate wealth faster and easier even with a little
    investment.This process allows
    individuals the feature of compounding and cost averaging helps investors
    accumulate wealth better in volatile funds.

funds tend to be riskier than most funds, only a systematic and disciplined
approach towards investments can help investors maximise its benefits and
minimise its risks. Contact our financial advisors and fund managers to build a
solid plan that will help you channel your investment in volatile funds through
SIP and will help you derive maximum benefits in terms of its features like
cost averaging.

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Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Past performance is not an indicator of future returns. Wealth Redefine is a AMFI registered Mutual Fund distributor – ARN - 167127

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