How to Make Money with Minimum Risk

You might have heard from lot of financial planners that those who cannot understand stock markets should go for mutual funds and best way to invest in mutual funds is through Systematic Investment Plan (SIP). In Systematic Investment Plan you need to invest every month in a mutual fund on a fixed date for a period of time say one year or two year etc. As per the financial consultants, this will give good returns. In case there are periods where markets are high for certain time and then it goes down for certain time then the average investment will even out and you will get positive returns.

This is totally misleading statement especially if you start out at when the stock markets are on a high. I have done that and found how misleading it is. The moment you stop the SIP the fund stops getting evened out and if you stop when the markets are at a low for last few months, then you chances of making any profits are quite less. Financial planner and mutual fund companies are the only gainers.

SIPs are for lazy investors. Most people want to earn money from stock markets automatically and they do not want to take much risk and in the bargain do not earn what they could have earned potentially.

How to Profit from Stock Markets?
If you want to make money in stock markets I will suggest a simple solution. Invest in index funds. In case you are unaware, index funds are mutual funds which are not actively managed. They invest money in all the funds which represents a index. For example, Nifty is collection of top 50 companies in India. Similarly Sensex consists of top 30 companies. If the index fund you choose is based in Senxexm the index fund you choose will have proportionate investment in all the stocks which are included in Sensex. Whenever Sensex increase by 5% that index fund will also increase by 5% and if the Sensex fall by 10% that index fund's value will also reduce by 10%.

As per the history of Sensex and any other index in the world, the indexes increase over time. So investing in them is a almost certain way to have profits.

Another advantage of index funds is, since it is not actively managed, they have very less fund management charges as compared to other actively managed mutual funds.

Although for a short period of time like one or two or three year a fund may give more returns than the index for over a longer period of time they are not able to beat the returns of index funds consistently. So go for index funds.

How to Invest in Index Funds
Making profits is easy. Invest when markets are down and sell when markets are high. So next question is how. It is simple. First fix some money say for example 5000 or 10000 rupees or dollars whichever is your currency. Decide that whenever markets fall by 5% then you will invest that money and whenever market rises by 7% you will sell units worth that money. Usually fall like 5% and rise of 7% will not happen more than 5 to 7 times a year.

Based on the averages you will definitely make money. If you want to increase the returns than you can increase the money you invest or sell in a transaction. So with each fall you buy more units are cheaper price and when it rises you book your profit. Whenever you buy or sell, mark when you will buy or sell next. For example if you sell today when the market is at 100 points then your would sell next time when market is at 107 and buy at 95. You would now mark these two as the new transaction points.

I have observed the pattern for last few years and have seen that it can make money. Another advantage is you do not need to watch the markets every day very closely. You only need to observer if it is gaining and moving towards the new markers. When it is close then you need to make sure that you do the transaction.

If you follow the above steps you can make money without much risks.