Investing in mutual funds through systematic investment plans is the most efficient way of investing. This system is the safest way to reach a high return on your investments because you will limit the risk of investing all your money on a high prize. It is a system which is useful for every kind of investor. You don’t need much money to invest through systematic investment plans and can often already be done with monthly payments of $25.00.
When you invest through a systematic investment plan you will invest a fixed amount every month or every three months and save for long term goals. It gives you the advantage that you don’t always buy on a peak prize and in some months you will buy more units than in other months which give you a higher return on the long term.
The advantage of investing in mutual through systematic investment plans is that you don’t need the money to buy one unit of this mutual fund. Suppose you want to invest in a mutual fund where the prize for one unit is $1.000; you need to pay this amount and increased with the extra costs for signing in immediately. When you invest in this mutual through a systematic investment plan you can spread your investment in time and buy on different prizes. The prize for one unit is maybe today $1.000 but will change every day or every week. You don’t have the risk that you always buy on a peak prize.
You can invest by example invest every month $50.00. This means that you have invested $1.000 after 20 months but the quantity of units will be not the same. You don’t know when you can buy on the lowest prize or on the most expensive prize which means spreading your investment in time will limit the risk of investing your $1.000 on a peak prize. There is a high change that you have bought more units for the same money especially if you invest through an investment plan of 10 years or more. Maybe one of the greatest advantages is that you reduce your average cost of investing.
Investing in mutual funds through systematic investment plans has the same principles as other investments. Don’t put all your eggs in one basket which means that diversification is the key to have success.
Start with determining your profile. Are you an aggressive, dynamic or defensive investor? When you know your profile you can determine the percentage you want to invest in mutual funds which invest in shares or bonds. By example you are a dynamic investor; in this case you can invest in mutual funds which invest 50% in shares and 50% in bonds through a systematic investment plan.
It is also possible to make a diversification in different sectors for the mutual which invest in stocks : by example 30% in financials, 30% in energy, 20% in pharmacy, 10% in emerging markets and 10% in consumptions. An example of diversification in bonds is investing in different countries and continents and also in currencies.
It is also not necessary to invest every month the same amount. Maybe you can consider investing a lower amount when the markets are high and a higher amount when the markets are low. This is the best system for buying the most units with the same amount of money and gives you mostly the best return on the long term.
Systematic investment plans are often used for saving for retirement or for expensive purchases like the celebration of a wedding anniversary, an expensive travel, an apartment, the education of your children and many others.
These plans have long term goals and are in fact used for a continuous growing of your savings. Reinvesting your dividends will lead to a considerable growth potential of your investment.
Systematic investment plans in mutual funds are a good choice of investing if you pay attention on your risk profile and annual revision is necessary.