When it comes to financial products, I often sound like a doomsday conspirator. Some of the things I have written in past:

  • Mutual funds are ‘mostly’ pointless;
  • F&O trading – that too based on software, charts, tips and tools, my friend – it’s like trying to reach supersonic speeds in your money losing efforts;
  • Stock brokers don’t want you to make money, they want you to trade (actually did you ever doubt this one?).

For a change, I will write about something I highly appreciate about finance, investing, about people and life in general. It’s a word I can say in less than a second, the application of which could take a lifetime – Discipline.

Having a disciplined long term investing plan has consistently proved to be one of the most successful investment strategies. However, being disciplined for long term is not easy, especially in stock markets where quick money is made (and lost) every single minute of the day. A range of systematic investment plans in India are making it possible for investors to bridge this gap.

Systematic Investment Plan (SIP) is a scheme wherein investors make regular monthly or quarterly payments of a pre determined amount towards purchase of securities. Typically, mutual funds companies run these SIP schemes to collect money from investors. The scheme may then utilize the amounts towards purchase of stocks or any other class of assets as per the pre-stated policy of the mutual fund scheme.

The amount of SIP may be deposited on a monthly, quarterly or on any other durational basis. The important point is that investors must stay disciplined about making timely payments. While systematic investment plans are a great way to put your savings towards long term growth, it is important to choose the fund scheme carefully after checking expenses, penalty provisions and asset class in which the fund scheme invests. On this page you will see a discussion on different types of mutual funds.

Even those of you who are convinced that stocks are the only viable investment opportunity in the current scenario will still have to choose between funds which invest varying proportions of their assets in equities and invest the balance in fixed income or debt instruments. You will also find funds which scatter their assets between all asset classes from gold to equities, debt and fixed income products.

I am always curious to find out what makes people invest in such mutual fund schemes? May be it is great marketing by the fund houses or a lack of understanding of the subject on the part of the investor. Any of these schemes will typically earn you anything between 8-12% annual return in something like 2-3 years. Not only do they have to justify fund expenses but also their own remuneration. The best systematic investment plans in India are the ones which you can start on your own. For someone looking to build wealth in stocks over a period of time, the strategy of investing a fixed amount every month, in up to 4-5 long term investment stocks has time and again proved to be the most successful one.

Note: In addition to your own research (for which the above links will be useful), you can also subscribe to my newsletter where from time to time, I talk about undervalued stocks and companies which are likely to see good margin improvements in future.

If you start a pure stock purchase plan and follow it with extreme discipline every month, you will surely beat the returns of most, if not all mutual fund schemes over a long term. Often, the most difficult part is to convince yourself to start on your own. I meet many people who know everything right that they need to do and yet they invest with those who do not. Trust me when I say this–If you made sense of 50% of what you read so far, then all you need is a demat account and you can start on your own.

Invest little by little every month, stay disciplined and stop looking at your fund performance on a daily basis, you will make a lot of money over time.