With Systematic Investment Plans emerging as the most preferred form of Mutual Fund Investment methods, the world of investors has gotten divided into two forms – Investors who know what they are doing and then those who are still amateur but think that that they have decoded the world of Systematic Investment Plans and Mutual Funds.
The difference in both can be seen in the portfolio they choose and also on the rate of profit they are able to make at the end of the SIP plan tenure, be it a year or five.
Now the question – Which one of the two investor types are you?
The agenda of this article is to find out just that.
Let us begin.
We will look into some of the most persistent myths surrounding the Systematic Investment Plan market and your answer to whether or not you believed them to be true up to this point will show how much you know about investment in Mutual Funds.
“SIP is best for Small Investors.”
MYTH – Though the minimum amount that can be invested in an SIP starts from Rs. 500, the upper value of the investment can go up to manythousands. So, instead of saying that SIPs are best fit for small term investors, a more accurate statement would be that Systematic Investment Plans are made up for investors who wish to bring some discipline in life – irrespective of what their net worth and monthly spending abilities are.
“Systematic Investment Plan Returns are only higher when the Markets are Bearish”
MYTH – The return on your SIP plan rarely depends on the prevailing type of market economy.. The whole essence of SIP is to be away from the analysis of market – whether on an all-time high or very low. Since you have to make SIP installment every month and with the benefit of rupee cost averaging, the market condition is the last thing that you will have to worry about and is also the last thing that even affects how your SIP performs.
“Systematic Investment Plans can help you retire tension-free.”
TRUTH – Considering that you are making the right choice in SIP portfolio, there is a very probable chance that you will be able to manage your retirement in peace. There are a number of SIPs that are known to function extremely well for those who are looking to get some funds collected for a tension-free retirement.
SIPs like – HDFC SIP Plan, SBI SIP Plan, and Axis SIP Plan are known to have helped a number of investors now retire without any worry.
“You should close SIP when your goals are met.”
TRUTH – Like every other form of investment, SIPs should also be attached with an end result. It can be anything – buying a car, buying your dream house, your child’s marriage, etc. Now, instead of going at it till the end of time, you should take the time off to enjoy what you have reaped once your financial goals are achieved.
“Systematic Investment Plans are only meant for the short term.”
MYTH – Rather the most common one, SIPs are the one investment type, which performs equally well in both short and long-term. In fact, there are mutual funds like Axis mutual fund or HDFC mutual funds that are known to give equally profitable returns to the investors whether they are being invested in the long term or short.
“The returns from Systematic Investment Plans can only be decoded by those who have learned to time the market.”
REALITY and MYTH – While it is true to some extent that SIPs are best done by those who have understood how the market will perform in a specific period; it is not the complete picture.
So, here were the six statements that we believe help differentiate a learned investor from those who are very new in the market. Now that you have seen the status of all the most commonly used statements in the SIP world, which side do you belong to?