Many investors, especially the conservatives ones or who have recently started investing, want to do a lot of research as to what is the potential of a fund, how much can it generate over a period of time, how much has it succeeded in the past etc. All this homework is necessary but not something you can completely rely upon at all times.
In these volatile market conditions it is very important for you to choose those funds that have shown good stand in all the market cycles. This can provide you the surety of how a fund may perform in different situations and circumstances. But pondering into a lot of graphs and statistics will only make your decision much more difficult.
Most financial advisors, to entice their customers, show them various graphs and statistics that create a kind of a technical jargon. Although it might show the fund’s performance in the past, it certainly is not enough to predict the fund’s performance in the future. Investing all your funds based on such assumptions may later find yourself into a debt trap of a personal loan or a credit card loan to finance your requirements.
If you do not want to see yourself in such situations, take good prudence before you make you final decision in deciding where and how much you want to invest. Whenever you want to take advantage of the soaring market rates but do not want to get exposed completely to the risk that may lie ahead, it is best you opt for a SIP route. Systematic Investment Plan will make you a disciplined investor, where you can develop the habit of saving over a period of time. The best way by which you can make most of this decision is by linking your investments with your financial goals.
Categorize your goals into short term and long term goals, and link your SIPs into funds accordingly. So that, when a need arises, for example, financing your child’s higher education needs, which may be about 10 years down the lane, you will be able to accumulate funds until that time, letting the other investments unperturbed.
By this way you should be able to bank on your investments and every fund invested through the SIP route, will definitely guarantee you good returns in the future.