5 common mistakes to avoid while investing through SIP
Systematic Investment Plan is one of the best way of creating wealth in the long run. It gives you the opportunity to invest in regular intervals with a pre-decided time frame and a fixed amount of money to invest in mutual fund schemes. Disciplined investment approach in SIP can create a big corpus in long term. May be it is for your long term goals like child's marriage, retirement planning or for buying your dream home. Some investors fail to maximise their return due to some basic errors.
Let's know what are the 5 common mistakes you should avoid while investing through SIP.
1 - Setting unrealistic goal
Sometimes we set some unrealistic goals which can not be achievable within the reasonable time frame. For example, you may want to retire early. but some factors that affect achieving your goal. Such as defining the retirement age, the target amount and the amount to be invested through SIP. Setting goals which are too high or impossible to achieve can be a unrealistic goal, so do avoid unrealistic goals.
2 - Choosing the wrong scheme for the wrong goal
While selecting the scheme you should consider some points. If you are a high risk taker you can invest in equity mutual fund schemes, which can be riskier if you invest for a short term. Equity mutual funds are volatile in nature, could increase your heartbeat in the falling market. If you are a risk averse investor you can choose debt funds rather than equity funds. So always look into your financial goal, whether it is a short term or long term goal, plan accordingly to achieve your goal. And the most important thing is the time horizon of your investment.
3 - Cancelling SIP during falling market
As equity investments are risky in nature due to the volatile nature of market. If you are investing through equity SIP, Be prepared to ride the roller coaster of market, during ups and downs of market you have to be patient and remain invested, else you can't take the advantage of rupee cost averaging. (You can visit my YouTube link to know more about rupee cost averaging). Cancelling your SIP during market volatility can impact your investment negatively.
4- Investing in Equity SIPs for short duration.
Investing in equity SIPs is always advisable for long term horizon. As equity market is volatile in nature. For shorter duration SIPs you can choose from Debt or Liquid schemes. Which gives you stability and also liquidity and best suited for your short term goals. You must avoid this mistake of investing in equity schemes for short duration while investing through SIPs.
5- Reviewing SIP performance frequently
Reviewing and rebalancing your investment in short duration must be avoided. You will not get the desired results while reviewing frequently as we know that equity schemes are for long term investment at least for 3-5 years and debt schemes for 2-3 years.
Conclusion
So while investing through SIP you must avoid the above said common mistakes to achieve your goal whether it is a long term or short term goal. You can also go through my YouTube link
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