SIP is one of the safest investment techniques in mutual funds, and investing a lump sum amount instead of SIP may result in greater payments depending on market circumstances. You also may not need a Demat account for investments. It varies; however, when compared to other investment programs, SIPs are among the most profitable and low-risk investments.
Is there anything that is preventing you from investing? It’s possibly a myth, and myths are the most common reasons for investors to avoid investing. If you, too, believe in fallacies about the SIP, here are a few facts to clarify.
Clearing some common myths
SIP is equivalent to guaranteed results.
One of the most common fallacies regarding SIP investments is that they provide assured outcomes, which is not true. SIPs, like other market vehicles, include risk. However, the danger is decreased, making it one of the safer alternatives, but they cannot promise outcomes, particularly in shorter time frames. SIPs in mutual funds are more vulnerable to risk and market changes when they are held for a shorter period. SIPs, on the other hand, gain from capital appreciation when invested over a longer period.
Do not invest in SIPs when the market is on a bull run.
Many investors, organizations, and individuals advise against investing in SIPs when the market is in a bull run in the NIFTY 50. A bull run occurs when the market is trending upward and increasing steadily, and mutual funds will be purchased less since prices are high. However, the myth is not true, and the explanation is simple: SIP is a long-term procedure while the market swings or is volatile.
SIPs are only for modest investments.
SIPs are often thought of as reserved for modest investments, but this is entirely incorrect. SIPs are a type of investing that is not restricted to modest amounts. Investors can invest as little as Rs.500 or more. SIPs function on rupee cost averaging, allowing investors to invest any amount.
SIP tenure and amount cannot be changed.
The rationale to invest in SIP is that it is the most flexible investing option. Under certain conditions, an investor can change the tenure term and amount as desired. Furthermore, depending on the scheme, some funds need a minimum tenure and investment amount for an SIP plan. This information may be found in the terms and conditions while working on paperwork. Furthermore, modifying the SIP tenure and amount is a simple operation that simply requires paperwork.
When starting an investment career and encountering the term SIP, a typical misperception is how much return SIP will give or what the optimal SIP will be. The confusion here is that SIP is not an investment product; rather, it is a method of investing in which an investor can pay in installments. The underlying goal of SIPs is to average out costs over time through frequent and disciplined investing in both the short and long term. You can use trading apps to track your investments.