Systematic Investment Plan (SIP) allows an investor to invest regularly in mutual funds on periodic intervals. As such, it enables investors to steer through the market movements effortlessly. However, amidst the growing popularity, there are several myths about SIP investing which the common man tends to carry along. With lower penetration of mutual funds in the household savings, it is time to bust these myths and help the investors feel more comfortable investing through SIPs.
Let us bust six common SIP myths
SIP is an Investment Product by itself
When people encounter the concept of SIP investment for the first time, they often tend to believe that some investment product is being pitched to them. SIP is not an investment product, but instead an investment facility, which allows the investors to make regular investments. The investment amount will be deducted automatically from your bank account and invested in the pre-specified mutual fund scheme.
SIP is only for small investors
SIPs are generally promoted as a medium to make savings even as low as Rs. 500. As such, it is often felt that SIP may be registered only for making small-ticket investments on a regular basis. However, this is not true, and the investors may register SIP for any amount as they may prefer on the higher side. In fact, a substantial SIP instalment amount may help the investors accumulate a substantial amount towards their financial goals in the longer run. Several HNIs and wealthy people invest through SIPs
SIP may be done only for equity funds
One may believe that SIP is to be done only for equity funds, as such funds are more prone to market volatility. However, investing through SIP is equally beneficial in debt funds as well. Investing in debt funds through SIP is akin to opening a Recurring Deposit (RD) with banks but with the potential of better returns. Even within the bouquet of debt funds, one may choose to invest in gilt funds, duration funds, credit risk funds etc. depending upon their risk appetite and return expectations.
SIP Investments may not be modified once registered
One may be in dilemma while registering a SIP, as such registration may call for long term commitment towards investing regularly. However, it is indeed the beauty of SIP investing that the investor enjoys the liberty to stop the SIP and register a new SIP with the modified periodicity, amount, and even the mutual fund scheme. As such, SIP allows complete flexibility to the investor to make changes to their investment plans.
SIP is not advised in a Bull Market
The biggest advantage of SIPs is that an investor doesn’t need to worry about when to start investing. Be it a bull phase or a bear phase, SIPs do their work when invested for longer durations. Only for lump sum investments, you need to be worried about the bull phase. SIPs in the long term offset the market volatilities and help in rupee cost averaging. Therefore, SIP investments are good to start anytime regardless of the market phase.
So now that you have cleared your doubts about investing in mutual funds through SIP take a step ahead towards investing right away and start investing towards your financial goals.
An Investor Education Initiative by UTI Mutual Fund
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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