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Ride Market Volatility With Stock SIP

01 Sep 2022 0 COMMENT
  • Can be initiated with a predefined sum or quantity of Shares
  • Makes you a disciplined investor
  • Stops you from timing the market
  • Steadily helps in building a meaningful corpus
  • Helps to better tackle volatility by capturing both the highs and lows of the market
  • Helps you balance risk by rupee cost averaging

Investing in equities is inevitable today for investors who are looking for inflation-beating returns.

But given equity’s notoriety for bouts of interim volatility, the key dilemma playing out in the minds of most of us these days is: should I wait, or should I take the plunge? The simple answer to this complex dilemma is to avoid going all in at one go. Having a systematic approach can help you turn market volatility in your favour.

You may have heard of systematic investment plans (SIP) in mutual funds, but the SIP route is available in direct stocks too.

Equity SIP

You can invest in direct equity or the shares of your choice though SIPs. Several brokerage houses offer this option on their platforms, though they may have different names.

For instance, ICICI Direct offers this option through Systematic Equity Plan (SEP). With SEP, you can invest a pre-specified sum of money or buy a pre-specified quantity of shares in a consistent manner. Let’s put it simply: If want to buy a stock worth Rs 5,000 on a monthly basis, you can do by selecting the pre-specified sum of money or you can choose the quantity of your choice, say, 15, 20 or 30 shares per month, week, or the period that you find suitable.

This will help you automate your equity investments. You just need to select the stock, the frequency, the duration of SEPs, the commencement date and the rest shall be done by your brokerage platform.

Sail Through Volatility

Equities have known to outperform every other asset class in the long run, and it won’t be wise to miss investing in equities simply because it tends to be volatile in the interim. While the volatility of the equity markets can neither be predicted nor be tamed, a disciplined and systematic approach to invest in equities, through SIP, can surely help one sail through the equity market without worrying about the high and the low tides.

Make Every Rupee Count

By investing through stock SIPs you will avoid any temptation to capture the highs and lows of the stock price. Moreover, following this disciplined investment approach will average out your cost over a period of time. This is the most effective way to invest in equity, especially during volatile times that we are currently witnessing.

In fact, apart from shielding you from the biggest risk of equity investing, which is timing the equity market, Equity SIP also gives you the freedom from tracking the stock market on a regular basis. This leaves you with ample time to hone your skills at your respective jobs or do the things of your choice.

Makes Market Timing Irrelevant

None of us would like to lose money and so we often try to get our timing (to invest in equity market) right. But what’s a good time? Stock markets are notorious for their volatile nature and so there is no such time as a good time to invest in equities. If you are investing for the long term, any time is a good time. In fact, long-term investors need not bother about daily or weekly market movements as the returns get averaged out in the long run even if they decline drastically or jump significantly in the interim.

Lighter On The Wallet

The other fascinating beauty of SIPs is that it can help you accumulate a meaningful corpus over the years, without pinching your pocket. Let’s assume you start with buying 10 units of Tata Consultancy Services on a monthly basis and assume the share price grows at 15 per cent per annum. In 10 years, you can accumulate a wealth of Rs 91.62 lakh, according to data provided by the ICICI Direct calculator.

Disclaimer: ICICI Securities Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400025, India, Tel No:- 022 - 2288 2460, 022 - 2288 2470. I-Sec is a Member of National Stock Exchange of India Ltd (Member Code:-07730) and BSE Ltd (Member Code :103) and having SEBI registration no. INZ000183631. Name of the Compliance officer (broking): Mr. Anoop Goyal, Contact number: 022-40701000, E-mail address: complianceofficer@icicisecurities.com. Investment in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. AMFI Regn. No.: ARN-0845. We are distributors for Mutual funds and all disputes with respect to the distribution activity would not have access to Exchange investor redressal or Arbitration mechanism. Please note that Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. I-Sec does not assure that the fund's objective will be achieved. Please note. NAV of the schemes may go up or down depending upon the factors and forces affecting the securities markets. Information mentioned herein is not necessarily indicative of future results and may not necessarily provide a basis for comparison with other investments. Investors should consult their financial advisers if in doubt about whether the product is suitable for them. SEBI research analyst Registration no.-INH000000990. ICICI Securities Ltd. acts as a referral agent to ICICI Bank Ltd., ICICI Home Finance Company Limited and various other banks / NBFC for personal finance, housing related services etc. & the loan facility is subjective to fulfilment of eligibility criteria, terms and conditions etc.