Five common Myths about SIP.

Systematic Investment Plan(SIP) is a tool used in investing in mutual fund schemes, where you have to choose a scheme according to your requirement from several fund houses. Major benefits of investing in SIP is, it gives you the facility and flexibility of investing in mutual fund schemes in a disciplined manner. You have to choose the amount, time horizon, schemes to invest according to your goals, risk epetite and time horizon. You need to have a goal for your sip investment.
So there are some common myths about SIP. Let's discuss.

Myth 1 - SIP can be done only for equity funds.

A common myth amongst investors is that you can only invest in equity mutual fund schemes via SIP mode. This is  not true. While investing in mutual fund schemes via SIP, you can choose from a wide range of investment options in mutual fund schemes i.e. debt funds, hybrid funds,index funds, thematic funds, fund of funds etc.

Myth 2 - SIP can't be modified once selected

Many investors are in the misconception that once SIP is initiated, it can not be altered, this is not true. SIP's are considered as one of the most flexible way of investing. It is possible that after registering for an SIP, investor can alter the amount, period and even mutual fund scheme. Investor have the freedom to change the amount of investment, tenure of investment as per their requirements.

Myth 3 - SIP is only for small investors

SIP enables an investor to invest in the market on a regular basis. Every individual is eligible for investing through SIP to achieve their long term goal, whether he is a small investor or a HNI.

Although SIPs provide an option to invest in small amounts, even minimum 100/- per month, but there is no upper limit. With the SIP method of investing, investor can invest as much as they prefer. Many high netwoth individuals and wealthy investors invest in the market through SIP route. The only requirement is the investor has to get the kyc done to start a SIP. Therefore, it is wrong to consider that SIP's are only for small investors.

Myth 4 - SIP is not recommended during bullish market conditions.

The basic concept of investing in stock market is to buy low and sell high. If you are investing a lumpsum amount in mutual fund scheme, then this formula of investment is good. But while you are investing through SIP, this logic may not work. Because you are investing a small amount in regular intervals, which is a disciplined investment approach. Investing small amount in long term can create wealth for you.While investing though SIP, you will also get the benefit of rupee cost averaging. Hence investment through SIP can be done any time. Hence it is not true.

Myth 5 - SIP Guarantee Returns

This is one of the myth that a lot of people invest through SIP with the false hope that it gives guaranteed return. This is not true, because mutual fund invests it's corpous in a number of securities according to the fund's investment objective. This means that mutual fund returns are linked to stock market, we know it very well that stock market is volatile in nature. So SIP is also linked to market volatility, hence SIP doesn't guarantee returns.

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Disclaimer - Mutual Fund investment are subject to market risks, read all scheme related documents carefully.

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