Doubts, fears and misconceptions emanating from myths are an integral part of investing and Systematic Investment Plan (SIP) is no exception. Let’s examine the top SIP myths that can hold back an investor from reaping the full rewards from his investments.
SIPs need to be timed well:
Instead of enrolling for a mutual fund’s automated SIP deduction facility, investors often invest a fixed sum every month on their own in a bid to bag the lowest possible Net Asset Value (NAV). This desperate style of investing lacks discipline and can prove detrimental when results fail expectations.
SIPs can’t be shelved or altered:
Many investors stay away from SIPs assuming they are stuck with it for the specified term. In reality, every mutual fund house gives the right to investors to modify or terminate their SIPs at any point of time. The SIP amount committed can be altered at will by cancelling the existing SIP and making a new request of the desired amount.
SIPs are only for small investors:
Contrary to popular perception, SIPs can serve the needs of any investor, whatever the quantum of investment. Whether you make higher savings per month or afford only Rs 1000 per month, SIP can serve your investment cause equally effectively. This is because SIP’s rupee cost averaging benefit is equally applicable on all SIP sums.
SIPs make sense only when markets are down:
Many investors wait for markets to drop rock bottom to start a SIP. In the process, they lose valuable time which is the most important factor in investment planning. SIPs are an efficient tool to counter market fluctuations, irrespective of the phase – whether bullish or bearish.