Common Answers to Common Questions-7

SIP explained further

Your cheques are cashed and you are allotted units based on the NAV of that date. Thus the cost of one unit of your savings at the end of the third month is not the NAV of that date, but the average price at which the units were purchased earlier. Thus you stand to benefit in the case of increasing NAV. Even in case of falling NAVs, the fall in value of your investments is not the same as that of fund, but slightly lower, as you would have been accumulated more units for the same amount of investment. Thus whichever the direction your fund goes, you stand to benefit in the case of systematic investment, as the strategy you have adopted is known as Value Averaging.

Common Answers to Common Questions-5

What is the best way to save ?

Savings is known as habit. Hence if you form a habit of savings, then you are bound to reap the rewards. When we accept savings as a habit, we do not emphasise on the quantum, but regularity. Habit always refers to systematic and regular way.
To those, who still live under controlled economy age, investment in mutual fund is unthinkable. They have to test waters. To experience the risk-reward theory, I always suggest them investment in mutual funds. Depending on their risk profile I choose the fund. The method I always advocate is SIP. Systematic Investment Plan besides making savings a habit oriented one, also ensures value averaging.