The concept of investing in mutual funds via SIPs catches my investor’s eye, prompting them to invest small amounts in a fund. But some are still skeptical, worried, and fearful about their investment in these funds with SIP. One of the obvious reasons is they are mutual funds & come with a fair share of risk. Another one is there are so many myths surrounding them that investors’ fear of taking additional risks often overpowers their investment decision.
But what are those SIP myths, do you need to really believe them, and do they impact your investment? While we cannot remove the risk from mutual funds, there are certain myths related to SIP investment that we have dispelled in this section to bring more clarity to your investment decision. We have also discussed how you can use specific financial tools such as SIP calculators to make your investment journey a success.
SIP is only for small investments and small investors:
Truth: SIPs are for big and small investors alike. Yes, SIPs do allow you to invest small amounts in funds periodically, but it doesn’t mean you can’t invest in a higher amount. Consider the functioning of SIPs as piggy banks. During our childhood, we all owned a piggy bank that we used to put money in to save it for later and use the corpus when needed. It’s a similar case in SIPs. The amount you put in is the amount you are likely to get out of it. There is nothing to do with the amount or type of investors.
SIP mutual funds and lump sum mutual funds are different:
Truth: From this, we can pull out two myths and debunk them. First, SIP and lump sum aren’t mutual funds. They are two modes for investing in mutual funds. Second, there are no different mutual funds for both. So, if you like a particular fund scheme, you can invest in the same through SIP or lump sum, depending on your preference. Investing via SIP allows you more flexibility in terms of investment money and time.
You can’t invest in SIP during bull market trends:
Truth: One of the biggest pros of SIPs is investors don’t need to time the market before investing in funds. No matter if the market is showing bear or bullish trends, SIP will perform as intended by balancing out the market fluctuations and through rupee cost averaging when invested for a longer time. You can use a SIP calculator to determine the amount and duration you need to invest in the funds through SIPs and to achieve your financial goals.
SIPs cannot be stopped once started:
Truth: Investing in mutual funds for a long time is beneficial, agreed. Yet you cannot be stuck into the funds in case of emergencies or when it’s underperforming. When talking about SIP, you get the flexibility to manage your investments the way you wish to. If you want to discontinue the SIPs for any reason, whether it’s cash crush or other, you can either stop the SIPs for a definite time or withdraw the amounts as lump sum or SWP. You also have the choice of moving your investment to different funds. The criteria for such benefits vary with fund houses, so be aware of the same before investing in funds. To avail of such facilities, you can reach out directly to the respective fund house or your financial advisor and avail for them.
SIPs can only be employed with equity funds:
Truth: This myth comes from the fact that equity funds are volatile, and investing in them through a lump sum might be risky. But, this isn’t true. You can select SIP for other mutual funds categories, such as debt funds, hybrid funds, etc. With debt mutual funds, you can enjoy a fixed income with SIP. On the other hand, with hybrid funds, you can get a mix of both equity and debt funds & enjoy both growth and fixed income opportunities.
Now that we have dispelled the most bugging SIP myths of the times, we are sure you have become familiar with the accurate ins and outs of the SIP. If you want to invest in mutual funds through SIPs, we suggest you do a background check on mutual funds. We also suggest you use the SIP mutual fund calculator from Glide Invest. Using a SIP calculator for mutual funds will help you plan your finances for both long and short-term investments. You can also evaluate the performance of funds, returns you will generate from a particular scheme, find the appropriate time frame in which you can achieve your goals, and many more such things.
Also, remember that SIP calculators show only approximate results, so by any means, they should not be considered solely for decision making.