A monthly investment plan may just be the investment strategy investors need to benefit from a turbulent market.
It is the nature of stock markets to move up and down over the short term. When markets hit a speed bump, some investors become fearful and take their money out. Others wait on the sidelines until the outlook becomes clearer. Why put in money or stay invested when share prices could fall further, you may ask?
Trying to predict stock movements is hard, if not impossible. And markets often do the opposite of what you think they should. So stay the course, even during periods of volatility. Research suggests that a systematic investment approach is often more profitable than one in which human judgment is allowed to play a role. Which is where the MIP (Monthly Investment Plan) comes in. By feeding money into the market at monthly intervals the MIP allows one to build positions gradually. If markets stay soft, well, the more your money will buy at any given time; and if they go up, then your purchasing power goes down but the overall value of your portfolio increases.
The great thing about an MIP is the control it offers. You fix the amount you want to invest; you decide where you want to invest; and you can stop and re-start the plan at any time. It’s not a magic solution but it can help you avoid a lot of the common investment mistakes. Now read on...!