Myths that encourage customers to move away from SIP

Investing is the best way to build up for a rainy day, and the mutual fund can be viewed as the one stop destination to simplify all of your investing tasks. There are two different ways through which one can put their hard-earned money into a scheme namely SIP and Lump Sum. SIP may be the best option for you, as it is one of two methods of investing in a mutual fund. It is a regularized investment mechanism that allows investors to adopt a slow but consistent path of converting their savings into investments. As it is essential to select an appropriate scheme to invest in, it is an equally important task to understand the knowledge of SIP before starting your investment.

Due to ignorant attitude and lack of time due to busy schedule, people tend to make mistakes while opting for their investment methodologies. There are some common mistakes that investors make, without knowing it. Therefore, in order to invest and make a profit, you need to avoid the following misconceptions.

Myth 1: SIP facilitates meager investments

There is a prevailing myth in the minds of investors that SIP was launched only to facilitate those customers who want to invest small amounts on a monthly basis, and is not suitable for those who intend to invest a relatively larger amount on a regular basis.

Reality: SIP is a general scheme that simplifies the investment requirements of all clients, whether the amount to be invested is large or small. Each client is free to select an amount to invest consistently over a stipulated period of time. For example, a customer is free to accept an amount as low as Rs 1,000 and as high as Rs 50,000 depending on affordability.

Myth 2: SIP does not hold excess amount

Once a customer starts a SIP plan, they cannot deploy an excess amount, if any. Investors have the idea that if they accept a SIP with a specific amount, they are not eligible to put an additional amount at any time.

Reality: SIP offers the possibility of recharging its clients. This means that a client enjoys the freedom to invest an additional amount along with the regular installment amount. For example, if a customer has opted for a SIP plan of Rs 3,000 per month and in a given month he has an extra Rs 6,000 that has not been used, then he can save it in his SIP account.

Myth 3: SIP is mutual fund scheme

Due to its comparison with other bank deposits like RD, SIP is considered as one of the plans and not as a method that helps to put money into mutual funds. Investors get the idea that they are putting their money into SIP and not through it.

Reality: It is an investment method and not a plan. SIP acts as a postman that takes the money of its clients to the scheme that they have opted for before. This means that it is only the operator that facilitates the work of investors and mutual fund companies.

Myth 4: SIP must be started in a bull market

Clients believe that the best time to undertake a SIP is when the market is trending up. They believe that a rising market will provide better returns compared to any other time.

Reality: It is true that SIP provides a facility to take advantage of bullish and bearish market conditions. A client can start investing as and when they want. Investors do not need to wait for a certain market situation to start the investment process. SIP provides an average return over an extended period of time by allowing the client to continue investing whether the market is up or down.

Myth 5: SIP can only be taken for some schemes

Customers believe that SIP is available for a handful of schemes. Tax savers, liquid funds, etc. does not allow customers to select SIP as their investment mechanism. This misconception has spurred clients away from some of those schemes that are capable of providing prolific returns.

Reality: SIP is a technique that is available to any and all schemes that operate under mutual funds. All closed plans allow the use of SIP to make a periodic investment.

To conclude, customers must get rid of the misconceptions associated with SIP in order to acquire the healthy benefit of investing.