Mistakes To Avoid When Investing In SIP

 A Systematic Investment Plan is an investment process provided by various mutual funds in which investors are willing to make small sums rather than lump-sum periodic investments. The investment may be made at a weekly, monthly, or quarterly basis. Via compounding interest, SIP helps to grow capital, ensuring higher maturity returns.

SIP mutual funds are versatile, so investors can, anytime they want, choose to reduce, or raise the amount of investment or avoid investing in the scheme. For beginners and those not well-versed in the financial market process, the SIP is the safest and best investment option.

Mistakes to Avoid when Investing in SIP

In general, investors choose funds based on their risk profile, tenure of investments, and returns provided over the past five to 10 years. While these factors should be reviewed, a variety of other factors also need to be examined to prevent the loss of capital in a market crash.

The following are common mistakes investors make when investing in SIP:

• Choose the wrong fund: This is the first step in beginning to invest in mutual funds, so you need to select one or more funds to invest in your money. You must know your investment goal, expected returns, and risk appetite before you make the payment. Before beginning an investment, it is advisable to perform a comprehensive investigation and study. If you have long-term objectives, your financial goals might be destroyed by choosing the wrong fund.
  
  
• High investment amount: Since SIP mutual fund allows you to invest small amounts of cash in mutual funds, make sure that you do not select a sum of money. This way, you cannot invest in the remainder of the year. What you need to do is pick a sum that you can conveniently spend per month to reap the returns you initially aimed for.
  
  
• Short-term Investment: This is another standard error several SIP investors have made. The value of the investment is subject to the time it is invested for and not the sum of the investment. In other words, the longer the investment period, the greater the value of the investment would be.
  
  
• Having unrealistic targets: Immature investors are also seen setting unrealistic investment targets. It is advisable not to expect phenomenal returns from your current investment. You should expect average returns instead and proceed with your daily investment process.

Can a SIP be customised?

SIP investment is the most lucrative investment. You can invest in a SIP and take advantage of periodic savings along with earned interest instead of keeping your money idle in a savings bank account. The benefits of investing in a systematic investment strategy, however, does not end there. As per your requirements, you can customise a SIP. Even the best systematic investment plan in India allows you to do so if you want to adjust your fund options or make any other required changes.