The recent trend shows that investments in mutual funds through systematic investment plan (SIP) are witnessing a rise month-on-month. More investors are using it to minimise the risk of market timing.

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SIP, as we know, allows investors to park regularly a fixed sum in mutual fund (MF) schemes. Under this, the setup is such that the money is automatically debited from the bank account on a fixed date, thus building a financial discipline in the life of the investor.

According to Kaustubh Belapurkar, director - manager research, Morningstar India, the trend establishes that investors are acknowledging this need for planned saving and investing from their monthly paychecks.

Yashpal Sharma, vice president, Taurus Mutual fund, while speaking to CNBC-TV18 said investors have developed a strong understanding of the SIP process.

Additionally, the rupee-cost-averaging feature of SIP has added to its success rate. This method allows investors to buy more units of a mutual fund when the market is low and reduce the per-unit cost of investment. This ensures that the overall cost gets averaged out.

Over the years, Sharma believes, that investors have tasted success using this formula and the current trend proves that more will continue to join in.

Another thing is the sentiment towards the markets.

After the pandemic, as Nitin Shahi, executive director at Findoc says, the markets have rallied 100 percent from the lows and are trading near all-time high levels. The sentiment of markets is quite positive which has attracted new investors.

Shahi goes on to add that every investor does not have the whole sum amount to be invested in one time. This is where SIPs play their prominence where the unit size of entering the market is also very low.

"Investors can invest through SIPs with a minimum of Rs 500 which would keep getting deducted on monthly basis. This makes it the ideal way to invest in equity. Various steps taken by the mutual fund industry and Sebi for transparency and knowledge related to mutual fund has attracted long term investors towards it,” Shahi affirms.

Participation in financial markets had increased tremendously over the years which is a good sign for the money markets as a whole.

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(Edited by : Jomy)

First Published:Mar 10, 2021 5:21 PM IST