If you are confident of the stocks that you are picking, you can invest in some stocks over a period of time, just as you do every month for mutual funds. Let us explain. So, if you are investing in say the equity mutual fund of a particular scheme through Systematic Investment Plans, you can also put the money in a similar way directly in some good quality stocks, which have the potential to grow. In short, you can buy a small amount of stocks every month, just as you buy shares.
This is one stock that is worth considering for investment SIPs. One of the biggest reasons is the dividend yield that an investor gets on the stock. The downside risks are very low because of the dividend yield. Last year the company declared a dividend of Rs 12.5 share, which on a current market price of Rs 146, yields a dividend of 8.16%. This means your dividend yield is much better than the bank deposit interest rates.
According to Edelweiss, Coal India's biggest achievement in Q1FY22 has been to rationalise production and reduce pit-head inventory to 60mt--lowest level in past six months.
"Lower inventory results in less grade slippage issues, thus improving FSA realisation. The brokerage is positive on the company's improving cash generation prospects that would help it maintain dividend yield of 12-15% in FY22 despite an uptick in capex. It maintains ‘BUY/SO' with target price of Rs 185 on 9x Q2FY23E EPS," the brokerage has said.
The risks here are limited as you keep getting a solid dividend payout.
Reliance Industries is a stock which you can consider for SIPs
If you are confident of the growth story of a company you can invest small amounts, just as you do and buy stock of Reliance Industries every month. Most brokerages are bullish on the stock of the company as the growth story for the next five years is in tact.
Recently, brokerage firm Motilal Oswal placed a buy call on the stock. The company factored in valuations of all the businesses of the company and arrived at a fair price of Rs 2,345 for the stock.
"Using SOTP, we value the oil to chemicals business at FY23E EV/EBITDA of 7.5x, arriving at a valuation of Rs 764 per share for the standalone business, and add Rs 68 for the E&P assets. We ascribe an equity valuation of a) Rs 847/share to RJio on FY23E 20x EV/EBITDA and b) Rs 755/share to Reliance Retail on FY23E 35x EV/EBITDA, factoring in the recent stake sale. Reiterate Buy, with target price of Rs 2,430 per share," Motilal Oswal Institutional Equities has said.
You can buy systematically buy every month and if you feel the price has risen, you can stop and look at other stocks that brokerages are highlighting.
Why invest in stock SIPs?
The one good thing about SIP in stocks is that should the price fall, you can buy again every month thus averaging the cost. This means just like mutual funds the risk of market fluctuations is hedged because the law of averages applies. In the above two stocks, one is a growth story and the other a dividend story, where your SIP can fetch good returns. We all know that if folks had to start an SIP in some banking stocks or IT stocks that would have had a solid portfolio. Nonetheless, it's never too later to start.
Stock market investment is subject to risk associated with the stock markets and hence investors need to be very careful. Neither the author, nor the brokerage, nor Greynium Information Technologies Pvt Ltd would be responsible for losses incurred based on a decision to buy into the stocks based on the above article. Stock indices are currently at lifetime highs and hence investors needs to be cautious.