Healthcare Stocks Continue to Be a Good Bet

Whether you look sector performance over the last week, month or year, healthcare is near the top. The sector has provided some of the biggest returns in recent months, and even years, and continues to perform well even while the S&P 500 is just marginally higher on the year. Here are four stocks in the healthcare sector that have already put up big numbers, and could still go higher, if they breakout to the upside.
Anacor Pharmaceuticals, Inc. (ANAC) is up 362% year to date (YTD). Following a more than $60 surge in mid-July the stock is consolidating as August begins. The high and low of the consolidation are $156.93 and $140.55, with a push above the high suggesting another rally. The July 28 high of $153.30 can also be used as an entry point. The rally from July 13 to the July 21 high, added to the low of the consolidation, provides an approximate target of $180. A drop below $140.55 isn't a short sale signal (due to the strong uptrend), but it can be used as a sell signal because it indicates a deeper pullback. There is little support until $113 and then $85, so a deeper pullback could be significant.

Radius Health, Inc. (RDUS) is up 101% YTD and just broke out of a pennant formation. A pennant is small triangle which forms after a strong price move. In mid-June the price accelerated higher from the $47 region to a high of $84.64 on July 15. The pullback that followed reached $70.27, but found support at $72 just days later. When the price broke above $75 on July 30 it penetrated the descending trendline of the pullback, signaling a likely move higher. Adding the $36 rally (approximate) since mid-June to the low of pennant formation gives a price target of $106. If the price falls back below $70.27 a deeper pullback is likely underway. Potential support is at $63, $55 and $51.75.

ACADIA Pharmaceuticals Inc. (ACAD) is up more than 53% YTD. The price rallied from a March low of $29.45 to a July 15 high of $51.99, and is moving in a tight channel lower since. A tight channel like this, following a sharp rally, is called a flag formation. If the price breaks above $49.50 it breaks out of the flag and points to a further rally. Between July 9 and July 15 the price moved approximately $11 higher. Add this amount to the low of flag (currently $47.01) to get an approximate target of $58. The price could continue to move lower within this tight channel, which would drop the entry point and profit target over time. If the selling accelerates it nullifies the flag pattern, since the price much stay within the channel in order for it to be considered a flag.

INSYS Therapeutics, Inc. (INSY) in up 113% in 2015, and after a brief pullback on July 27 is already looking to break higher. The price reached a 52-week high on July 23 at $44.98, pulled back to $38.85 on July 27, then broke above the high again on July 31 setting an intraday high of $45.90. The stock closed the day at $44.92, below the former high, but momentum still favors the bulls. A continued push above $45, and then $45.90, gives a price target of $50 to $51. The target is the top of a trend channel in place since May. A drop below $42 warns of a deeper correction, while a drop below $39 is a warning the uptrend could be in trouble.

The Bottom Line

These healthcare stocks have all performed and still have upside potential. Every trend does eventually end, but trend traders buy into trends until they reverse. These stocks haven't reversed yet, but a move below support indicates they could. Stocks with such big gains are volatile and highly speculative, which means large reversals can occur in very short periods of time. Using a stop loss is encouraged, but losses can still be larger than expected if the price gaps through the stop loss order. These stocks still offer upside potential, but not without risk.

9 Tricks Of The Successful Forex Trader

For all of its numbers, charts and ratios, trading is more art than science. Just as in artistic endeavors, there is talent involved, but talent will only take you so far. The best traders hone their skills through practice and discipline. They perform self analysis to see what drives their trades and learn how to keep fear and greed out of the equation. In this article we'll look at nine steps a novice trader can use to perfect his or her craft; for the experts out there, you might just find some tips that will help you make smarter, more profitable trades, too.
TUTORIAL: Beginner's Guide To MetaTrader 4
Step 1. Define your goals and then choose a style of trading that is compatible with those goals. Be sure your personality is a match for the style of trading you choose.
Before you set out on any journey, it is imperative that you have some idea of where your destination is and how you will get there. Consequently, it is imperative that you have clear goals in mind as to what you would like to achieve; you then have to be sure that your trading method is capable of achieving these goals. Each type of trading style requires a different approach and each style has a different risk profile, which requires a different attitude and approach to trade successfully. For example, if you cannot stomach going to sleep with an open position in the market then you might consider day trading. On the other hand, if you have funds that you think will benefit from the appreciation of a trade over a period of some months, then a position trader is what you want to consider becoming. But no matter what style of trading you choose, be sure that your personality fits the style of trading you undertake. A personality mismatch will lead to stress and certain losses. (For more, see Invest With A Thesis.)
Step 2. Choose a broker with whom you feel comfortable but also one who offers a trading platform that is appropriate for your style of trading.
It is important to choose a broker who offers a trading platform that will allow you to do the analysis you require. Choosing a reputable broker is of paramount importance and spending time researching the differences between brokers will be very helpful. You must know each broker's policies and how he or she goes about making a market. For example, trading in the over-the-counter market or spot market is different from trading the exchange-driven markets. In choosing a broker, it is important to read the broker documentation. Know your broker's policies. Also make sure that your broker's trading platform is suitable for the analysis you want to do. For example, if you like to trade off of Fibonacci numbers, be sure the broker's platform can draw Fibonacci lines. A good broker with a poor platform, or a good platform with a poor broker, can be a problem. Make sure you get the best of both. (For related reading, see How To Pay Your Forex Broker.)
Step 3. Choose a methodology and then be consistent in its application.
Before you enter any market as a trader, you need to have some idea of how you will make decisions to execute your trades. You must know what information you will need in order to make the appropriate decision about whether to enter or exit a trade. Some people choose to look at the underlying fundamentals of the company or economy, and then use a chart to determine the best time to execute the trade. Others use technical analysis; as a result they will only use charts to time a trade. Remember that fundamentals drive the trend in the long term, whereas chart patterns may offer trading opportunities in the short term. Whichever methodology you choose, remember to be consistent. And be sure your methodology is adaptive. Your system should keep up with the changing dynamics of a market. (For related reading, see What is the difference between fundamental and technical analysis and Blending Technical And Fundamental Analysis.)
Step 4. Choose a longer time frame for direction analysis and a shorter time frame to time entry or exit.

Many traders get confused because of conflicting information that occurs when looking at charts in different time frames. What shows up as a buying opportunity on a weekly chart could, in fact, show up as a sell signal on an intraday chart. Therefore, if you are taking your basic trading direction from a weekly chart and using a daily chart to time entry, be sure to synchronize the two. In other words, if the weekly chart is giving you a buy signal, wait until the daily chart also confirms a buy signal. Keep your timing in sync.
Step 5. Calculate your expectancy.
Expectancy is the formula you use to determine how reliable your system is. You should go back in time and measure all your trades that were winners versus all your trades that were losers. Then determine how profitable your winning trades were versus how much your losing trades lost.
Take a look at your last 10 trades. If you haven't made actual trades yet, go back on your chart to where your system would have indicated that you should enter and exit a trade. Determine if you would have made a profit or a loss. Write these results down. Total all your winning trades and divide the answer by the number of winning trades you made. Here is the formula:

E= [1+ (W/L)] x P – 1 where: W = Average Winning Trade L = Average Losing Trade P = Percentage Win Ratio Example:If you made 10 trades and six of them were winning trades and four were losing trades, your percentage win ratio would be 6/10 or 60%. If your six trades made $2,400, then your average win would be $2,400/6 = $400. If your losses were $1,200, then your average loss would be $1,200/4 = $300. Apply these results to the formula and you get; E= [1+ (400/300)] x 0.6 - 1 = 0.40 or 40%. A positive 40% expectancy means that your system will return you 40 cents per dollar over the long term.

Step 6. Focus on your trades and learn to love small losses.
Once you have funded your account, the most important thing to remember is that your money is at risk. Therefore, your money should not be needed for living or to pay bills etc. Consider your trading money as if it were vacation money. Once the vacation is over your money is spent. Have the same attitude toward trading. This will psychologically prepare you to accept small losses, which is key to managing your risk. By focusing on your trades and accepting small losses rather than constantly counting your equity, you will be much more successful.
Secondly, only leverage your trades to a maximum risk of 2% of your total funds. In other words, if you have $10,000 in your trading account, never let any trade lose more than 2% of the account value, or $200. If your stops are farther away than 2% of your account, trade shorter time frames or decrease the leverage. (For further reading, see Leverage's Double-Edged Sword Need Not Cut Deep.)
Step 7. Build positive feedback loops.
A positive feedback loop is created as a result of a well-executed trade in accordance with your plan. When you plan a trade and then execute it well, you form a positive feedback pattern. Success breeds success, which in turn breeds confidence - especially if the trade is profitable. Even if you take a small loss but do so in accordance with a planned trade, then you will be building a positive feedback loop.
Step 8. Perform weekend analysis.
It is always good to prepare in advance. On the weekend, when the markets are closed, study weekly charts to look for patterns or news that could affect your trade. Perhaps a pattern is making a double top and the pundits and the news are suggesting a market reversal. This is a kind of reflexivity where the pattern could be prompting the pundits while the pundits are reinforcing the pattern. Or the pundits may be telling you that the market is about to explode. Perhaps these are pundits hoping to lure you into the market so that they can sell their positions on increased liquidity. These are the kinds of actions to look for to help you formulate your upcoming trading week. In the cool light of objectivity, you will make your best plans. Wait for your setups and learn to be patient. (For information on determining what the market's telling you, read Listen To The Market, Not Its Pundits.)
If the market does not reach your point of entry, learn to sit on your hands. You might have to wait for the opportunity longer than you anticipated. If you miss a trade, remember that there will always be another. If you have patience and discipline you can become a good trader. (To learn more, see Patience Is A Trader's Virtue.)
Step 9. Keep a printed record.
Keeping a printed record is one of the best learning tools a trader can have. Print out a chart and list all the reasons for the trade, including the fundamentals that sway your decisions. Mark the chart with your entry and your exit points. Make any relevant comments on the chart. File this record so you can refer to it over and over again. Note the emotional reasons for taking action. Did you panic? Were you too greedy? Were you full of anxiety? Note all these feelings on your record. It is only when you can objectify your trades that you will develop the mental control and discipline to execute according to your system instead of your habits.
Bottom Line
The steps above will lead you to a structured approach to trading and in return should help you become a more refined trader. Trading is an art and the only way to become increasingly proficient is through consistent and disciplined practice. Remember the expression: the harder you practice the luckier you'll get.

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Can Facebook Become the Next Google?

No two companies better represent the mainstreaming of tech products than Google Inc. (GOOGL) and Facebook (FB). While the former has reorganized the world's information, the latter has woven a social web for more than a billion people on the planet. Their efforts have been rewarded handsomely by the stock market, with Google and Facebook among the most highly-valued companies in the tech sector. As of this writing, Google is valued at approximately $362 billion by the markets and Facebook is valued at $241 billion.
Both companies have had similar growth trajectories, reaching exponential revenues in no time. But, going forward, the market has different expectations of Facebook as compared to Google. Thus, Facebook's shares are trading at 85 times their current earnings, while Google's are trading at a more reasonable 25 times their earning potential.
So is Facebook the next Google?
It certainly seems so.

Facebook: A Company On a Mission

The Menlo Park-based company reinvented social media in much the same way that Google reinvented search engines. It pioneered a lucrative advertising model and is making a serious bid to become the next tech conglomerate by doubling down on virtual reality (VR). (Google, on the other hand, is making serious investments in robotics.)
But that's where the similarities end. In fact, Facebook may be on its way to becoming bigger than Google. Google's dominant position is a result of growth in a single area: search. Facebook, however, has already diversified into other industries and has become a major destination for advertising and user services.
Facebook's success was achieved in an intensely competitive social media landscape and across multiple platforms. The company's development mantra – Move Fast Break Things – has stood it in good stead through its stratospheric growth. For example, the company's entry into mobile apps was a disaster with a buggy app that was slow to load. But in less than a year the app was rewritten, refined and has since become a major money driver for the social network. Facebook has grown its revenue from zero to 69 percent of its total revenues in fewer than three years. In the meantime, the company's product has evolved with user needs and market demands. It has undergone multiple iterations to incorporate features from competitors and user requests. (See also Mobile Ad competitors: Facebook Vs Google.)
The company has also made some deft business moves. For example, its 2012 acquisition of Instagram, a popular mobile social network that could have become a serious threat, was a master maneuver. The app, which subsequently has released a web version, is the fastest growing major social network and is used by celebrities and government agencies alike to connect with audiences.
Similarly, Facebook has also garnered a major chunk of the rapidly growing mobile messaging market with its acquisition of Whatsapp in 2013 for $19 billion. Facebook's acquisition of a hot virtual reality startup – Oculus Rift – can only serve the company well as VR gains a steady cult of enthusiasts and breaks out into a mainstream entertainment experience. (See also Facebook's future technologies.)

Google: A Besieged Firm

In contrast, Google is besieged on multiple fronts.
It is struggling to outline a coherent mobile strategy to investors in a mobile era. This could have serious consequences for the company's bottom line as mobile advertising is poised to overtake digital advertising as soon as 2019. In fact, the company is already cutting costs and hiring due to shrinking margins and slow growth. The company needs to diversify to maintain revenue growth and retain talent.
Google is also under attack from regulators in Europe, its second largest market, for its dominant position in the search industry. In addition to anti-trust lawsuits, the company may also face resistance from wireless carriers there. Recently, carriers leaked plans to block mobile ads of the kind displayed by Google, a move that could seriously affect the company's financial prospects because mobile searches outnumber its desktop searches and Europe is its second biggest revenue market after the United States.

The Bottom Line

Google's foray into social networking with Google Plus was a disaster and failed to produce revenues for the company. Like Facebook, Google has also made significant investments in emerging technologies. These include near term bets, such as robotics and Internet of Things technologies, as well as moonshots, such as sidestepping death and self-driving cars. But it will be some time before those bets make a difference to the company's bottom line. This is because each technology — be it is self-driving cars or robotics — requires a concert of circumstances and lobbying efforts, such as development of standards around IoT and the regulation of driverless cars.
Given these developments, it might be a good idea to rephrase the original question: When will Facebook overtake Google?

the difference between investing and trading

Investing and trading are two very different methods of attempting to profit in the financial markets. The goal of investing is to gradually build wealth over an extended period of time through the buying and holding of a portfolio of stocks, baskets of stocks, mutual funds, bonds and other investment instruments. Investors often enhance their profits through compounding, or reinvesting any profits and dividends into additional shares of stock. Investments are often held for a period of years, or even decades, taking advantage of perks like interest, dividends and stock splits along the way. While markets inevitably fluctuate, investors will "ride out" the downtrends with the expectation that prices will rebound and any losses will eventually be recovered. Investors are typically more concerned with market fundamentals, such as price/earnings ratios and management forecasts.
Trading, on the other hand, involves the more frequent buying and selling of stock, commodities, currency pairs or other instruments, with the goal of generating returns that outperform buy-and-hold investing. While investors may be content with a 10 to 15% annual return, traders might seek a 10% return each month. Trading profits are generated through buying at a lower price and selling at a higher price within a relatively short period of time. The reverse is also true: trading profits are made by selling at a higher price and buying to cover at a lower price (known as "selling short") to profit in falling markets. Where buy-and-hold investors wait out less profitable positions, traders must make profits (or take losses) within a specified period of time, and often use a protective stop loss order to automatically close out losing positions at a predetermined price level. Traders often employ technical analysis tools, such as moving averages and stochastic oscillators, to find high-probability trading setups.
A trader's "style" refers to the timeframe or holding period in which stocks, commodities or other trading instruments are bought and sold. Traders generally fall into one of four categories:

• Position Trader – positions are held from months to years
• Swing Trader – positions are held from days to weeks
• Day Trader – positions are held throughout the day only with no overnight positions
• Scalp Trader – positions are held for seconds to minutes with no overnight positions

Traders often choose their trading style based on factors including: account size, amount of time that can be dedicated to trading, level of trading experience, personality and risk tolerance. Both investors and traders seek profits through market participation. In general, investors seek larger returns over an extended period through buying and holding. Traders, by contrast, take advantage of both rising and falling markets to enter and exit positions over a shorter timeframe, taking smaller, more frequent profits.

Read more: http://www.investopedia.com/ask/answers/12/difference-investing-trading.asp#ixzz3gnqpWevK

Forex Tutorial: What is Forex Trading?

What Is Forex?The foreign exchange market is the "place" where currencies are traded. Currencies are important to most people around the world, whether they realize it or not, because currencies need to be exchanged in order to conduct foreign trade and business. If you are living in the U.S. and want to buy cheese from France, either you or the company that you buy the cheese from has to pay the French for the cheese in euros (EUR). This means that the U.S. importer would have to exchange the equivalent value of U.S. dollars (USD) into euros. The same goes for traveling. A French tourist in Egypt can't pay in euros to see the pyramids because it's not the locally accepted currency. As such, the tourist has to exchange the euros for the local currency, in this case the Egyptian pound, at the current exchange rate.

The need to exchange currencies is the primary reason why the forex market is the largest, most liquid financial market in the world. It dwarfs other markets in size, even the stock market, with an average traded value of around U.S. $2,000 billion per day. (The total volume changes all the time, but as of August 2012, the Bank for International Settlements (BIS) reported that the forex market traded in excess of U.S. $4.9 trillion per day.)

One unique aspect of this international market is that there is no central marketplace for foreign exchange. Rather, currency trading is conducted electronically over-the-counter (OTC), which means that all transactions occur via computer networks between traders around the world, rather than on one centralized exchange. The market is open 24 hours a day, five and a half days a week, and currencies are traded worldwide in the major financial centers of London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris and Sydney - across almost every time zone. This means that when the trading day in the U.S. ends, the forex market begins anew in Tokyo and Hong Kong. As such, the forex market can be extremely active any time of the day, with price quotes changing constantly.

Spot Market and the Forwards and Futures Markets There are actually three ways that institutions, corporations and individuals trade forex: the spot market, the forwards market and the futures market. The forex trading in the spot market always has been the largest market because it is the "underlying" real asset that the forwards and futures markets are based on. In the past, the futures market was the most popular venue for traders because it was available to individual investors for a longer period of time. However, with the advent of electronic trading, the spot market has witnessed a huge surge in activity and now surpasses the futures market as the preferred trading market for individual investors and speculators. When people refer to the forex market, they usually are referring to the spot market. The forwards and futures markets tend to be more popular with companies that need to hedge their foreign exchange risks out to a specific date in the future.
What is the spot market?More specifically, the spot market is where currencies are bought and sold according to the current price. That price, determined by supply and demand, is a reflection of many things, including current interest rates, economic performance, sentiment towards ongoing political situations (both locally and internationally), as well as the perception of the future performance of one currency against another. When a deal is finalized, this is known as a "spot deal". It is a bilateral transaction by which one party delivers an agreed-upon currency amount to the counter party and receives a specified amount of another currency at the agreed-upon exchange rate value. After a position is closed, the settlement is in cash. Although the spot market is commonly known as one that deals with transactions in the present (rather than the future), these trades actually take two days for settlement.

What are the forwards and futures markets?Unlike the spot market, the forwards and futures markets do not trade actual currencies. Instead they deal in contracts that represent claims to a certain currency type, a specific price per unit and a future date for settlement.

In the forwards market, contracts are bought and sold OTC between two parties, who determine the terms of the agreement between themselves.

In the futures market, futures contracts are bought and sold based upon a standard size and settlement date on public commodities markets, such as the Chicago Mercantile Exchange. In the U.S., the National Futures Association regulates the futures market. Futures contracts have specific details, including the number of units being traded, delivery and settlement dates, and minimum price increments that cannot be customized. The exchange acts as a counterpart to the trader, providing clearance and settlement.

Both types of contracts are binding and are typically settled for cash for the exchange in question upon expiry, although contracts can also be bought and sold before they expire. The forwards and futures markets can offer protection against risk when trading currencies. Usually, big international corporations use these markets in order to hedge against future exchange rate fluctuations, but speculators take part in these markets as well. (For a more in-depth introduction to futures, see Futures Fundamentals.)

Note that you'll see the terms: FX, forex, foreign-exchange market and currency market. These terms are synonymous and all refer to the forex market.

Read more: http://www.investopedia.com/university/forexmarket/forex1.asp#ixzz3gurgyOPF

Will RBI take notice of soft growth and soft prices, and turn accommodative?

In the April 2017 Policy, the Reserve Bank of India was hawkish on inflation and bullish on growth. What has happened over the past two months suggests that its fears and hopes were somewhat misplaced: inflation has nosedived, and so has growth. Will this potent combination of softer prices and faltering growth prompt the RBI to budge?

Not so quickly perhaps. The ground reality might warrant a change in policy stance from ‘neutral’ to ‘accommodative’ before the Street should start expecting a decisive rate cut.

Soft Growth and Benign Outlook

The latest GDP print deserves attention. The headline growth number showed the GDP falling to 7.1 percent in FY17 compared to 8 percent in the previous fiscal and the gross value added (measure of real economic growth) falling to 6.6 percent from 7.9 percent in the previous fiscal. In fact, the GVA at constant prices at 5.6 percent in the fourth quarter of FY17 is the weakest in the past two years. However, the number that should really concern policy makers is the investment rate measured by gross fixed capital formation – that has declined from 31.2 percent in Q1 FY16 to 28.5 percent in Q4 FY17.

Can rates revive the economy? There is no straight answer. But the road ahead has multiple soft patches, hence we are quite circumspect about RBI’s bullish stance on growth in FY18.

While prima facie the GST regime is unlikely to be inflationary, we believe industry is likely to pare inventory levels during the transition to the GST, mildly dampening production in Q1 FY18. Moreover, Q2 and Q3 are likely to witness some adjustment as businesses get used to the new compliance procedures and higher working capital requirements. The positive impact of the GST on economic activity is likely to be visible only from Q4 FY18 onward.

The resolution of the bad asset problem through the Insolvency and Bankruptcy Code could exert further pressure on the financials of banks, should the quantum of haircut far exceed the existing provision, and could turn them more risk-averse in the short term. Recent data suggests the deceleration in bank credit continues unabated in the current fiscal.

With growth unlikely to look up in a hurry, is inflation the prime concern?

In April 2017, the MPC had indicated that it expects the CPI inflation to average 4.5 percent in H1 FY2018, before rising to 5.0 percent in H2 FY18, with risks evenly balanced around this projected trajectory.

The headline print shouldn’t worry RBI. The year-on-year (YoY) CPI inflation eased sharply to a series-low 3.0 percent in April 2017, led by food inflation. Moreover, the core-CPI inflation (excluding food & beverages and fuel & light) declined to 4.5 percent in April 2017 from 4.9 percent in March 2017.

The imminent revision in house rent allowance based on the Seventh Central Pay Commission’s recommendations might push up housing inflation in the ongoing fiscal.

However, there are a fair number of tailwinds. As per the projections of the Indian Meteorological Department, India is likely to emerge unscathed from El Nino weather pattern as it is expected to set in only during the latter part of the 4-month monsoon season. Expectations are that price rise is likely to be moderate under MSPs (Minimum Support Price).

With Trump trade waning, commodity prices have cooled off and are unlikely to rear their ugly head any time soon.

While the strength of the rupee has added to the disinflationary forces, a big reversal of the same is unlikely given the heightened interest of global liquidity for India.

What could go wrong?

What could still emerge as lingering concerns for the RBI is the temporal and spatial distribution of monsoon and its impact on prices. The ongoing unrest by farmers in Maharashtra demanding a loan waiver, and its potential to spiral into a multi-state movement, could also be a matter of concern.

As the Central Bank starts deliberating on its Monetary Policy stance, the Street will be watching out for
•             RBI’s change in stance from ‘neutral’ to ‘accommodative’
•             The central banks’ take on inflation trajectory

•             RBI’s prognosis on growth and GDP in FY18

While the RBI has been given a significant mandate to steer the NPA resolution in the system, the Street, by and large, does not expect the focus of the policy to include NPAs, as it will be dealt with at length separately. A section of the market would perhaps be looking up to the central bank for probable introduction of any new instrument for liquidity management like Standing Deposit Facility (SDF).

Lumpsum investing stands apart from a systematic investment plan

There is a great amount of interest among investors to ensure that they are investing in mutual funds through a systematic investment plan (SIP). However many investors do not take the time or make an effort to understand what a SIP is actually. This often leads to a situation where they make the wrong interpretation and this could lead to them adopting a route that is completely opposite to what a SIP actually requires. This requires some basic understanding and here is a look at the entire term and how one should know its various details.

Nature

A SIP consists of a process whereby an investor invests a fixed sum of money each month usually into an equity oriented mutual fund though this could be in a debt fund also. The key part of the process is that a fixed sum like say Rs 5,000 or Rs 10,000 is invested each month on a fixed date so it could be the 1st of the month or it could be 20th of the month. The idea is that every month a fixed sum has to be invested.

The SIP is the process of investing and is not an investment by itself. This distinction is very important for any investor because many people say that they want to undertake a SIP investment. The belief is that the SIP is an investment and that this will lead to returns being earned by the investor. This is not the case because the SIP by itself does not guarantee any returns for the investor. It is important to see the fund in which the investment is being made because this is where the returns are going to come from. Only when the fund where the money is invested rises in value will the investor be able to earn some returns. So the selection of the fund for the investment is important and this needs to be given the required attention also.

Not lumpsum

Another confusion that a lot of people have is that they say that they want to use a SIP for investment and then in the very next sentence say that they have a lumpsum to invest. These two ways of investing are the exact opposite of each other so if one of the routes is adopted then the other cannot be. For example the SIP involves investing a small sum each month out of the total amount to be invested so in effect it means that the total investment is being broken down into small parts and then the amount is being invested.

A lumpsum on the other hand is a big investment that is made at a single point of time. There are risks to making such an investment especially when one looks at equity funds because this will mean that the investment is going in at a single point of time. The position in the equity markets at this point will determine the kind of returns that are earned and there are risks to this as a fall in the markets after the investment will not give any opportunity to the investor to average out their cost. On the other hand the SIP gives the investor this opportunity as well as flexibility and hence this is something that needs to be considered. One can choose either of the options depending on their position and the goals that they want to achieve. However this needs some careful thought but most important is that they need to be clear about the meaning as otherwise they might be chasing things that are not possible.