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Investing for a rainy day is the best way, and mutual funds can be seen as a one-stop destination to ease all your investment tasks. There are two different ways through which one can invest their hard earned money in a scheme, SIP and Lump Sum. SIP can be the best option for you as it is one of the two ways to invest in Mutual Funds. It is a regular investment mechanism that allows investors to take a slow but steady path of converting their savings into investments. As it is necessary to choose a suitable scheme for investment, it is equally important to understand the insights of SIP before starting your investment.
Due to ignorant attitude and lack of time from busy schedule, people make mistakes while choosing their investment methods. There are some common mistakes that investors unknowingly make. Therefore, in order to invest and reap benefits from it, you must avoid the following misconceptions.
Myth 1: SIP offers low investment
There is a misconception in the minds of investors that SIP has been introduced only for the convenience of customers who want to invest small amounts monthly, and it is not suitable for those who want to invest relatively higher amounts on a regular basis. want to do
Reality: SIP is a holistic plan that simplifies the investment needs of all customers, whether the amount to be invested is large or small. Each customer has the freedom to choose the amount to invest consistently over a specified period. For example, a customer is free to take an amount as low as Rs. 1000 and as high as Rs. 50,000 on the basis of affordability.
Myth 2: There is no surplus amount in SIP
Once the subscriber starts the SIP plan, he/she cannot deploy the surplus amount, if any. Investors have a belief that if they take SIP with a specific amount, they are not eligible to invest additional amount at any point of time.
Reality: SIP provides the facility of top-up to its customers. This means that the customer enjoys the freedom to invest additional amount along with the regular installment amount. For example, if a customer has opted for a SIP plan of Rs. 3000 per month and in a certain month he has an additional Rs. 6000 that is lying unused, he is free to keep it in his SIP account.
Myth 3: SIP is a scheme of mutual funds
Due to its comparison with other bank deposits like RD, SIP is considered as one of the schemes and not a method which helps in investing money in mutual funds. Investors have an idea that they are investing their money in SIP and not through it.
Reality: It is an investment method and not a scheme. SIP acts as a postman who takes the money of its customers to the scheme that they have chosen earlier. This means that it is just the carrier that eases the job of the investors as well as the mutual fund companies.
Myth 4: One should start SIP in a bull market
Customers believe that the best time to do SIP is when the market is moving upwards. He believes that a rising market will provide better returns than at any other time.
Reality: It is true that SIP provides the facility to take advantage of bullish and bearish market conditions. A subscriber can start investing whenever he wants. Investors do not need to wait for a particular market condition to start the investment process. SIP provides average returns over a long period of time by enabling the customer to continue investing whether the market is low or high.
Myth 5: SIP can be taken only for certain schemes
Customers are under the impression that SIP is available for only a few schemes. Tax-savers, liquid funds etc. do not allow customers to choose SIP as their investment mechanism. This misconception has led customers away from the few schemes that have been able to offer handsome returns.
Reality: SIP is one such technique which is available for each and every scheme operated under Mutual Funds. All close-ended plans allow the use of SIPs for making regular investments.
In conclusion, customers should get rid of the misconceptions related to SIP in order to get the full benefit of the investment.
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