I have come across a statement in a financial daily which says - “If you are an astute investor, consider investing small sums on every 5 per cent or more declines in the broad market. Otherwise, use the SIP route.” Does this make sense? I am not crystal clear with the term broad market.
- Jojo Jacob
It would be great if one is astute enough to consistently buy at dips and sell at highs. But it is very difficult to define a dip. Since January 2008, market has dipped and dipped further. Most professional and individual investors are unable to successfully time the market.
The way to make money from equities is to build a portfolio of good stocks and patiently hold on it. And by good stocks, we mean stocks of businesses with sound management and the potential to burgeon their earnings. But this requires an investor's time and inclination. The alternative is to buy a ready portfolio by way of a mutual fund and invest regularly. SIP ensures discipline and helps manage investment anxiety caused by dips. This is the next best way to profit from equities.
Broad market is generally referred to the direction of the leading indices.
This article was originally published on January 30, 2009.
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