Perfect Time for SIPs and Staggered Investments

The coronavirus pandemic has been a wake-up call of sorts. It has put our strategies in perspective and challenged long-held practices. For many people, this crisis has also acted as a reason to rethink their financial habits. In India, a nationwide lockdown was announced towards the end of March 2020.

It was at that point that the Indian stock markets saw a significant downtrend. At that juncture, many investors in the equity market panicked and sold off their investments in a bid to limit their losses. In the months since then, the markets have made a surprising recovery, prompting experts to rethink the investment options best suited for times like these.

And in the midst of this uncertain period, it turns out that SIPs and staggered investments are emerging as the winners. You can make use of these investment strategies to invest in the best mutual funds in the market, so over the years, as the market emerges from the crisis and corrects itself, your money would be well-placed to give you good returns.

Before we look at what sectors the top performing mutual funds in India could possibly belong to, let’s first get to the bottom of what SIPs and staggered investments are.

What are SIPs and staggered investments?
When it comes to financial planning, investing has always featured at the top of the priority list. Some investors prefer to park a lump sum amount in their preferred financial instruments, while others take the approach that involves investing small sums periodically. This strategy, where investors put in small amounts of capital at regular intervals, is known as a Systematic Investment Plan (SIP).

Although SIPs are generally suited for investing in the best mutual funds in the market, you can also adopt this approach to invest in any instrument that supports regular, periodic investments. Just like SIPs, a staggered investment strategy also allows you to invest consistently over a longer period of time. When you adopt a staggered investment approach, you generally have the freedom to be a bit more flexible with when you invest and how much you invest.

Why is this the perfect time for SIPs and staggered investments?
If you’re keen on investing in the top performing mutual funds in India but unsure of putting in a huge corpus, the SIP route may be ideal for you. You could even make use of the many SIP return calculators available online to better understand the long-term effects of your investment. Here’s why you could benefit from these investment strategies now.

You can benefit from rupee cost averaging
Rupee cost averaging is basically the advantage you get when you purchase more units of an investment at lower prices and fewer units at higher prices. So, all in all, the overall cost of your investment comes down. Now, SIPs are particularly useful if you wish to benefit from rupee cost averaging, since you can plan your investments accordingly. With the right investment schedule, you can purchase more units of the best mutual funds in the market when the prices are low, like they are now.

You don’t need to time the market
Timing the market during a crisis like this can be particularly hard. There’s no telling how the market may move in the short term, because new developments keep cropping up each day. For instance, a spike in the death stats could pull the prices down, while a bit of good news like progress in the development of a vaccine for covid-19 could make the markets rally. So, in difficult times like these, staggered investments or SIPs eliminate the need to time the market, while also simultaneously allowing you to invest in a disciplined manner.

You can infuse small amounts of capital
These are uncertain times for both self-employed people and salaried individuals. Job losses are the norm in many industries and pay cuts are also quite common. In times like these, it can be tough to set aside huge sums of money to invest as lump sum amounts. Instead, smaller amounts are easier options for most people. That’s why this is the right time to consider investing through SIPs and staggered investment options.

Experts in finance agree that some sectors like healthcare and telecom are likely to perform well in these uncertain times. So, if you’re looking for the top performing mutual funds in India, you could look into these sectors for a safer investment route. ETFs and index funds are other choices that give you a good amount of liquidity too. And as always, before you invest in mutual funds, it’s a good idea to use a SIP return calculator to get a better idea of how your funds are likely to grow in the coming years.