GPSC PI Exam Study Material PDF Quiz No.9 By GnanKutir

GPSC PI Exam Study Material PDF Quiz No.9 By GnanKutir

Mutual fund is an entity that pools money of large number of investors to invest in different securities. This money is then managed by a professional Fund Manager on behalf of the unit-holders, to invest it in various financial instruments.

A Systematic Investment Plan is an investment vehicle, where an investor makes fixed, regular payments into a mutual fund, to reap the benefits of long-term investing. It helps you gain exposure to your selected asset class through the investment of a small or large amount of money, at fixed intervals and in a disciplined manner.

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Benefits of a SIP
The compounding factor: make your money work for you by generating earnings which are further reinvested to generate their own earnings. The compounding process ensures that both the capital gains and interest earned from an investment, earn interest, as time passes.

Rupee cost averaging: trump the maxim “buy low, sell high” by automatically adjusting quantity bought against price, in order to average the cost of acquisition over time. Investing a fixed amount in the markets, at regular intervals helps lower the average cost of investment, as one buys more quantity when the price falls, and less quantity when the price rises.

Market timing becomes redundant: invest wisely across market cycles, reducing the impact of volatility. Since investments are made at fixed regular intervals, timing the market for appropriate entry levels becomes less important.

Disciplined approach: inculcates discipline in the investment process, as the investor is committed to invest a fixed amount of money, at periodic intervals.

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