Financial Risk Management
Exponential Weighted Moving Average of Selected Systematic Investment Plans of Mutual Funds and Their Risks

Article Details
Pub. Date : March, 2020
Product Name : The IUP Journal of Financial Risk Management
Product Type : Article
Product Code : IJFRM30320
Author Name : Joseph Anbarasu, Ramya Prakash
Availability : YES
Subject/Domain : Finance Management
Download Format : PDF Format
No. of Pages : 11

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Abstract

Whether it is a share or any other market instrument, the prices of such investments are subject to volatility. The performance of such investment is based on the market trend. Systematic Investment Plan (SIP) of mutual fund investment, unlike lump-sum investment, is done systematically throughout the investment period. Though the investors are not worried about market trends on daily basis, the SIP is subject to price variations. Thus, the performance of SIP of selected funds and their risks are dealt with in this study. The historical data of various SIPs prove that risk has long tail, implying less risk. Similarly, the daily Net Asset Values (NAVs), mostly of respective schemes, are higher than the average NAVs of the schemes. The findings reveal that the most recent data influences the occurrence of the NAV of today's fund. In the long run, decay effect removes this trend. The findings also show that investment in SIP is less risky than any other mutual fund investments in the market.


Description

Systematic Investment Plan or SIP allows one to invest systematically, i.e., weekly, monthly or quarterly, based on one's preference in mutual funds. SIP is a method of mutual fund investment and not a type or comparable investment instrument. The other tool for investing in mutual funds is a lump-sum amount or one-time investment. SIP is a hassle-free way to invest in mutual funds. Unfortunately, many investors, especially new ones, think SIP is an investment by itself, while it actually is a way to invest in mutual funds. A mutual fund is only a financial instrument. Through mutual fund, the investors money is pooled together and invested in the stock market instruments. The pooled money is also invested in other instruments like treasury bills, government securities, corporate bonds, and money market instruments, depending on the interest of the investors. The investor's money is invested in a mix of shares and bonds, if he/she chooses a hybrid fund. Therefore, if he does not wish to invest in the market directly or he does not want to take a high risk but wants to invest in the market with low risk, then mutual funds offer him great schemes based on his/her needs and objectives.


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