Investing in stocks for the long run is a tried and tested way to build wealth, but many investors, like you, struggle with timing your stock purchases. Should you invest a lumpsum amount immediately or spread it over time through an SIP?
For those looking to invest in a volatile market, trigger SIPs offer an appealing solution. Trigger SIPs allow you to start an SIP, but the instalments are not made at fixed intervals. Rather, the SIP triggers when the stock price falls to your defined threshold.
How do trigger SIPs work?
Your SIP amount automatically increases when the market drops 10% from its previous high. This allows you to buy more low-priced units without monitoring the market. Some key points about trigger SIPs:
- Set the trigger percentage based on your risk tolerance. A higher percentage, like 15-20%, means fewer but larger investments. A lower trigger, like 5-10%, means more frequent but smaller.
- Choose whether increases are permanent or temporary. Permanent means your SIP stays at the increased amount even after the market recovers.
- Trigger SIPs are a form of rupee cost averaging. By investing more when prices drop, you can lower your overall cost per unit over time. This positions you for higher returns once the market recovers.
Benefits of using trigger SIPs for investing
Trigger SIPs allow you to automate your investment strategy by setting pre-defined rules to increase your SIP amounts. This powerful tool provides several benefits to you:
Increased returns
With trigger SIPs, your SIP amounts increase when the market dips, allowing you to buy more units at lower prices. This rupee cost averaging helps generate higher returns when the market recovers.
Capitalising on market upswings
One of the primary benefits of trigger SIPs is the ability to capitalise on favourable market conditions. By setting trigger conditions based on market parameters like index levels, you can ensure that your SIP plan purchases align with upward market trends. This approach enables you to maximise bullish phases, potentially maximising returns during positive market movements.
Stay invested
Trigger SIPs encourage a long-term, disciplined investment approach. By automatically your strategy based on pre-set rules, you are less likely to stop or decrease SIPs due to market changes or emotional factors.
Flexibility and customisation
Trigger SIPs offer a high degree of flexibility, allowing you to customise your investment approach. Whether you prefer an aggressive strategy to capture short-term opportunities or a conservative stance to mitigate risks, These SIP investment plans can be tailored to align with your financial goals and risk tolerance.
To wrap up
Trigger SIPs provide an automated way to invest based on pre-defined events. Rather than relying on emotions or guesswork, trigger SIPs enable you to stick to a disciplined investment approach. They ensure you continue to invest regularly, even when markets are volatile.
The key is to start – select your events, set your triggers, and let the power of automated investing work for you.
