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Value averaging a better system

Systematic transfer plan works well if the investor has a lump sum

Devangshu Datta 

The Systematic Investment Plan (SIP) is popular and practical for anybody with periodic savings. It is a good way to invest in volatile assets such as equity, exchange traded funds, equity mutual funds (MFs) and debt-MFs. If prices fall, an SIP automatically averages down the price of acquisition, making it a hedge. This ensures the investor is poised to make greater profits eventually when the market cycle turns. An SIP is less effective when prices rise. But then the investor is making a profit anyway. A variation is the systematic transfer plan (STP) where the investor ...

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First Published: Thu, June 22 2017. 00:02 IST
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