Have you ever been worried about losing your money when you want to save and grow it? Alright, you’re not alone. Many people feel the same way you feel. But, what if I told you there is a safe and easy way to grow and save your money? It’s called the 7-5-3-1 Equity SIP(Systematic Investment Plan).
What is Equity SIP?
Equity SIP stands for “Equity Systematic Investment Plan.” It’s the way for people to invest their money in the stock market in a systematic and disciplined manner.
What is The 7-5-3-1 strategy equity SIP?
The 7-5-3-1 strategy equity SIP is the best way to get maximum profit by investing in stocks. After applying this rule, there is almost a 0 chance of loss in investment. It is the way that helps to achieve great money by converting the smaller portion of stock into a larger portion of stock.
As the rule itself suggests about 4 rules hidden in the number(7-5-3 and 1), we’ll also talk about these 4 golden rules of marketing.
What is ‘7’ in the 7-5-3-1 Equity SIP Formula?
It is the first rule that we’re going to discuss. Here the ‘7’ indicates the minimum investment time period in years in equity investing. Well, this rule is based on the investment period in the mutual fund or stocks to get the proper profit amount. So, it suggests that investing the money in a mutual fund continuously for at least 7 years is most important if we want to see the value positive.
It contributes to SIP(Systematic Investment Plan) to get good returns.
Also, if we look at the statistics of the last 22 years in the field of investment, we find that if a person has been involved in equity investment for only up to 1 year then there is only a 58% chance of getting returns more than 10% investment. But, if done for at least 7 years there is an 80% chance of getting returns of more than 10%.
What is ‘5’ in the 7-5-3-1 Equity SIP Formula?
The second rule of 7-5-3-1 Equity SIP is about smart investing with the 5-finger strategy. Basically, it reminds the points to be considered in mutual funds to get maximum returns successfully.
The five golden points are about the proper way of doing investment in the stock market. It indicates:
i) Quality: There is a saying “Unlock the potential, Invest in Quality.” A person who wants to invest in any stocks in the stock market first needs to check the quality of the stock.
ii) Values: While making an investment in any stock in the stock market, we need to observe the value of the Stock Market. We must consider the activeness of the number of stakeholders in it.
It is very necessary to check “How many people’s money has been invested in a particular stock market?”
iii)Growth: Growth in the particular Stock market is the most important factor that needs to be considered at the time of investment. Minimum last 3 years growth rate should be observed in the Stock market before choosing the stocks available in the Stock Market.
iv)Holding: The next important point that falls under the 7-5-3-1 equity SIP is holding our investment. Suppose we want to invest in a stock ‘A’ available in the stock market then we need to observe the holdings of stock “A” i.e. where our money is being invested so that no fraud happens.
v)Expense Ratio: We need to minimize any kind of expense that we give to the mutual fund company as they are managing our investment. So, we need to try giving less expenses to the mutual fund company.
What is the meaning of ‘3’ in the rule 7-5-3-1 Equity SIP Formula?
The next phase i.e. 3rd phase of your investment in the stock market indicates your closeness toward the financial goals. It is the time period in which you may suffer from various ups and downs from which you have to make yourself ready for any situation. This strategy among 7-5-3-1 Equity SIP gives you a clear idea of facing any kind of situation that may arise pre-, mid-, and after the investment in the stock market.
Basically, 7-5-3-1 Equity SIP’s “3” consists of the following situations that fall under the part of SIP:
i) Disappointed phase: It is the phase that may occur at the time when you enter the field of mutual trust or the stock market. It may last for 2-3 years only though, it depends on your patience.
ii)Less Returns(Irritation): The next phase that may occur after investment is less returns than the expected value. It might lack but don’t panic in this situation. It’s not very uncommon to not face the problem of irritation due to fewer returns from stock. So, you should rather make yourself ready for such situations.
iii)Panic: Many people worldwide suffer from the situation of panic caused by the negative value seen in the stock. The negative value in stock may arise due to certain pandemics.
You might have experienced it during the pandemic of Covid-19. So, in this situation, the 7-5-3-1 equity SIP suggests keeping patience and waiting for the correct time of market correction. You should keep in mind that it’s not always permanent, it’s for the short term only.
These are some possible phases that may threaten you, but you must be ready to grow.
What is ‘1’ in the 7-5-3-1 Equity SIP Formula?
The last rule of the 7-5-3-1 Equity SIP Formula suggests that investors should increase their investment in the stock at least by 10% annually.
Suppose you have made an investment of 500 in any stock on the stock market in the year 2023, then according to the rule ”1” of 7-5-3-1 equity SIP, you should increase your investment by around 10% of 500 i.e 550 total investment in the next year(2024) and so on. It is the most important step of SIP editing.
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Conclusion:
The 7-5-3-1 rule for equity SIP is the proper strategy that must be applied by every investor in the field of the stock market. It always helps in earning or growing the money successfully. It involves various steps like portfolio allocation, portfolio diversification, consistency, etc. It is a great path for the investors. So, every investor should know and implement the 7-5-3-1 rule for equity SIP.