Thursday, August 11, 2016

Is SIP Safe To Invest?

SIP of course is safe to invest in, unless the world is destroyed by a nuclear conflict or climate change, which I do not foresee happening anytime soon.
Besides external factor like wars and global warming, we ourselves destroy the inherent safety of investments, including the SIP, by constantly worrying about the performance of the investment, market conditions, etc. The media also is doing a lot of disservice to the investors through their relentless noise.
What is the Solution? Once you have started a SIP, just keep it alive, by monthly subscription, for a very, very long time, like 20 to 50 years. Simply turn a deaf year to what the newspapers may say or your family or friends may advise. 
By following this simple formula you not only ensure the continuation of the already built-in safety of the SIP, but also let the 'Miracle of Compounding' to work in your favour and most likely by the end of the said long period you will end up a very rich and character wise a very strong and disciplined person.

How Do I Invest Small Amount of Money in Share Market Safely?

Dear Friend!
I find your question is very sensible on two crucial aspects: small amount of money and safety of investment.
Safety of investment comes from knowing what we are doing. Conversely not knowing what we are doing causes ‘Investment Risk’. There are two things you can do:
  1. You can learn investing safely in the share market through ‘Value Investing’ for which I recommend you read the wonderful book, “The Intelligent Investor” by Benjamin Graham. Value Investing is safe and shares can be purchased for small amounts of money. 
  2. If you can not learn investing for whatever reasons, you may invest in an ‘Exchange Traded Fund’ or ‘ETF’ or a ‘Mutual Fund’.
An ETF is created by fund managers that exactly reflect popular stock indices like BSE Sensex and NIFTY. In India ‘Goldman Sachs’ provide many ETFs, the popular being ‘Nifty BEES’ and ‘Junior Nifty BEES’. You may also invest in any mutual fund of a credible organisation. ETFs can be purchased just like shares on the stock market through online online platforms.
Mutual Funds:
Mutual Funds are operated by reputed financial institutions. There are different funds based on equity, debt and various mixes of both. Debt funds provide regular income but no capital appreciation. Equity funds provide both. Please do not allow yourself to be confused by issues like which mutual fund best returns. All funds are equally good in the very long term.
What is important in investing is not to disturb the investments for very, very long periods of time, say for twenty to fifty years. Over such long periods of time the law of ‘Miracle of Compounding’ will work for you in creating significant wealth.
In conclusion, yes, you can invest small sums safely in the stock market and become rich over a long time.