When it comes to investing, several individuals have created certain beliefs revolving around investments that play a huge role in determining the type of investment they decide to go forward with and the mode of investment as well. If you are someone who is already investing in mutual funds or wishes to invest in mutual funds, you’d know that there are two modes of investing in mutual fund – either through a one-time investment via lumpsum investment or through regular and systematic investments via SIP investment. Just like other types of investments, people hold certain beliefs about these modes of investment. And sadly, more than often these beliefs are often built on a false pretext. In this article, we will understand certain myths revolving around SIP mode of investment.
Common SIP mutual fund myths bust
Let’s understand some common SIP mutual funds myths:
- You can invest in SIP
One of the biggest misunderstanding novice investors have against SIP investment is that they can invest in SIP. Basically, similar to FDs (fixed deposit), mutual funds, etc. they consider SIP investment to be an investment product in itself. However, SIP is merely an investment facility. SIP permits investors to invest in investment product on a regular basis.
- Only small investor must invest in SIP
SIPs are usually promoted as an investment tool that allow to invest in investment vehicle with an amount as low as Rs 100 per month. While this is absolutely true, several individuals form a notion that SIP is only suitable for small-ticket investments. Basically, they feel that SIP might not be an ideal investment tool to invest a bigger amount. However, that’s slightly misguiding. SIP investments have no upper limit. So basis your financial goals, risk appetite, income level, and investment horizon you can invest any amount in SIP mutual funds.
- SIP is solely ideal for equity investments
Though it is true that equity investments have the potential to flourish beautifully when invested through SIP route of investment, that doesn’t mean the same cannot be true for debt funds or debt securities. Investing in debt securities via SIP mode of investment is quite similar to opening a RD (recurring deposit) or FD (fixed deposit) with the banks. However, with the added advantage of higher returns and the flexibility to break your investment amount into several small, significant parts.
- SIP mode of investment might not be ideal for a bull market
One of the biggest advantages of investing in mutual funds through SIP mode of investment is that you don’t have to worry about timing the markets or when is the right time to enter the markets. Be it a bear market phase or bull market phase, SIPs have the potential to deliver brilliant result when invested for a longer duration. This is because SIPs help to offset market volatilities in the long run. Hence, you can start an SIP investment at any time you deem fit.
Hopefully this article has helped you in clearing your doubts about SIP investment and will motivate you to take one step closer to being financially independent. Happy investing!