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Important concepts of Investing

Back to Module 2

Chapter 4 : Important concepts of Investing

6. Power of Triggers

If there is one thing that any investor must be wary of, it is taking decisions to buy or sell based on a hunch or an emotion and not on solid analysis. The market is a highly volatile place with thousands of transaction taking place every day. Millions of people look at the social, economic, political and cultural events and try to predict market movement based on them. This behavior adds to the volatility of the stock prices.

Any investor wanting to make wise decisions must safeguard against following these trends. To help investors, most AMCs offer a trigger facility which can be used to redeem their units seamlessly. Some of the commonly offered triggers are:

  • Value driven trigger:

    Units are redeemed when the value of investment reaches a certain threshold.

  • NAV driven trigger:

    Units are redeemed when the NAV reaches a certain value or changes by a percentage specified by you.

  • Date driven trigger:

    Units are redeemed on a pre-specified date.

  • Capital gains driven trigger:

    Units are redeemed when the capital gains on the investment reach a certain amount or percentage.

  • Index driven trigger:

    Units are redeemed when the BSE or NSE index rises or falls by pre-specified points.

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