Common Myths about SIP Investment in India

Because Systematic Investment Plans (SIPs) are an affordable and disciplined way to create wealth, they are becoming extremely popular among retail investors. Despite such benefits, SIP is also subject to several myths discouraging investors from choosing this investment mode. To help you make the most of the mutual funds market, this guide will debunk the five most common myths associated with SIP.

Myth #1 SIP investments are only meant for small investors

This is a fairly common myth among new investors. Since SIP investments can be made for an amount as low as Rs. 500, investors tend to think that the investment instrument is meant for only small-ticket periodic investments. The truth is that the amount of monthly investment depends entirely upon your budget and the investment scheme. Through a higher SIP instalment, you will be able to build a large corpus over time and meet your long-term financial goals.

Myth #2 You should only invest in SIP in a bullish market

A lot of new investors tend to be very sensitive and sentimental to market movements. So, when the market is showing an upward trend, they do not make any fresh investments in fear of holding less number of units per SIP instalment. But the best part about SIPs is that they need not be planned based on market highs and lows. All you need to do is stay invested for a longer duration, and SIPs will perform their job.

Additional Read – Things to Keep in Mind Before Investing in Sector Funds

Myth #3 The SIP tenure and amount cannot be modified

Another common SIP myth circulating among investor circles is that once you have chosen your bouquet of investments, you cannot make any changes down the line. But nothing could be further from the truth. SIPs offer a high degree of flexibility in the sense that the SIP amount, tenure, even the MF scheme can be modified in the future. 

Myth #4 SIP guarantees positive returns

Some investors believe the myth that simply because SIPs in mutual funds are relatively a safe investment instrument owing to rupee cost averaging, they offer guaranteed returns. But this is not true because SIPs are still market-linked instruments, and as such, the returns are not guaranteed. But, if you stay invested for the long-term, SIPs do offer the benefit of capital appreciation by offsetting market volatility.

Myth #5 SIPs invest only in equity markets

Where some investors believe the myth that SIP offers guaranteed returns, some others believe that SIPs can be started only for equity funds. While this is not true, it is also not necessarily something to fear. Equity funds are only risky in the short term, but they offer high returns in the long run. Moreover, a high-performing portfolio will always have a mix of equity, debt, index, and hybrid funds, among others. You need to choose them based on your investment goals, risk profile, and other requirements. 

Additional Read – Everything About New Fund Offerings (NFO)

Wrapping up

With the most common myths out of the way, you can rest assured that the best SIP to invest in is the one that meets your investment requirements closely. To help you make an informed decision, Tata Capital offers your personal investment partner – the Moneyfy app. Simply download the app, browse through different MF categories, and build your unique portfolio.