If i decide to go for SIP in stocks,what would be the optimum amount to invest monthly? Can I invest 5000 monthly?
Secondly if the stock has gone above out purchase price , then should we still do SIP in it?Or only when it goes below our purchase price we should buy?
Kindly advise
Regards,
Nilesh
1) Amount depends on you and how much you save.
2) SIP removes emotions out of investing and gives you a decent average cost over time. If you already have good list of stocks, you can use SIP. There is no logic in not investing above purchase price. Ideally you want to hold stocks that move up.
Note - Market is a place where a lot of people loose money through their own actions. Investing requires a whole range of knowledge and skills in identifying, comparing stocks and having conviction to hold and knowing when to sell, and how to manage a portfolio etc.
Behavioral Biases will ensure that most people buy high and sell low. People book quick profits and hold loosers forever (
"ill wait until price reaches my cost price" ) etc.
Even Bluechips are not guaranteed to make money, just look at BHEL for last 4-5 years. And small companies can be multibaggers or they can turn to nothing like opto circuits. Equity is volatile, and Bear crashes can be very painful.
Point is you need to study and develop skills to invest and a bit of luck.
Unless you are convinced that you have those (proven) skills, i suggest that you participate using Mutual Funds. The next decade might give very good returns and with good Mutual Funds you have a low risk way of investing. By low risk i mean the risk of underperforming the indices in the long run and not low volatility.
By all means, do invest in stocks and learn but put majority of money in Mutual Funds.
You can use value research,
fundsindia and
morningstar.in to get a list of good funds. But dont blindly look for good ratings / last year returns. Ratings change and in case of value research they define risk as volatility which is not necessarily true. Instead read their analyst commentary, get overview of portfolio numbers( equity/debt, market cap etc. Dont care much for what stocks they buy), check expenses and check how consistently they have done well over the years. Some good funds are
here.
Invest using SIP ( or STP from liquid ) and
invest in DIRECT funds only.