Suppose I follow markets closely and regularly. Now which method is best to invest in mutual fund for a time-span of 5 years: Whether-
1.) I invest lump sum on every large dip in the market throughout the year.
2.) I invest as SIP throughout the year.
3.) I Do Both
I personally go for option 2 or 3 but definitely not 1. If one want to invest in lump sum then timing is everything and it is very difficult to time markets and profit from it for normal people. Instead if one chooses other options then there is possibility of investing at highs and lows, thus averaging the price.
No one precisely knows which direction the market will move or how long it will rise. Determine the target money(say 10 lack) Select the fund based on your risk taking capacity.Start you SIP.Don’t listen to any one until your is target achieved… If the passive investor try to time the market he will ends up with frustration and disappointment. So SIP is the best method for passive investor…