SIP in passive funds

Trading in and out of stocks is a tricky affair. It involves constant activity and high trading costs. Moreover, to be a successful trader in the long term, you have to make the right calls consistently. Sounds tough, doesn't it?

On the other hand, by being disciplined with your investments and aiming to replicate the index, you may create wealth over the long term in an effortless, easy and relatively low-cost way. So, how is that possible?

Become a disciplined investor through a systematic investment plan (SIP), which allows you to invest a fixed amount at regular intervals (monthly, quarterly, etc.). This approach may help you navigate market volatility. Investing through SIPs also helps you average the purchase price over time.

To replicate index returns, passive funds can be ideal. These funds, comprising index funds and exchange-traded funds/fund of funds, simply track an underlying index and seek to generate returns as per that.

For instance, the Nifty 50 Index consists of India's top 50 listed companies in terms of market capitalisation. By investing in passive funds tracking such an index, you may seek to get underlying index returns.

Moreover, passive funds typically have lower expense ratios than actively managed funds.

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