investors can use the systematic method of Investment In equities In which they put some amount every month for some time. It helps in generating wealth over a long period of time due to the advantage of the power of compounding. There are different ways to do this for equity. Investment,

Investing in ETFs or Index Funds

Exchange traded funds (ETFs) and index funds replicate the index they represent. To invest in ETFs, you need to open a Demat account and a trading account. In case of index funds, you can invest in them directly from mutual funds or through a distributor.

invested in shares straight through sip

You can invest regularly in various stocks directly from the exchange by setting up a stock SIP. Various broker platforms provide this facility where the investor has to decide the regular amount to be invested and the allocation percentage in different stocks. Investors have to set a mandate for stock SIP and transfer that amount to the trading account every month to ensure that the installment is invested regularly.

Investing in Equity Mutual Funds

Instead of researching different stocks to invest in, you can invest in an equity mutual fund, which is managed by experienced fund management experts, who do extensive research and analysis to build a scheme portfolio. A Systematic Investment Plan (SIP) in a Mutual Fund scheme is easy to set up, and can be started with as little as Rs 500. A SIP instruction can be given online or by filling a physical form.

things to note

• Investors should consider the expense ratio and consult their tax advisor for tax implications on equity investments.
• While investing for the long term, one should periodically review the portfolio to weed out the 3 non-performing ones.

Content on this page is courtesy of Center for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.