A Systematic Investment Plan is one of the easiest ways to invest in the stock market. It allows you to make consistent investments month after month, which instills financial discipline. On top of that, it makes use of rupee cost averaging, which helps you lower the cost of investment, thereby increasing your returns in the long-run.
However, despite the many benefits of SIP, there are a significant number of investors who still tend to stay away from this investment strategy. One of the many reasons for this can be attributed to the host of myths surrounding it. That’s why, in this article, we’re going to decode a few of the most common myths about SIP. So, let’s begin.
This is one of the most common myths surrounding a Systematic Investment Plan. However, contrary to popular opinion, an SIP is not a product that you invest in. Instead, it is an investment strategy, where you’re required to invest a particular amount regularly in a fund of your choice for a specified period of time.
Another popular myth is that investors can only invest their money in equity funds through an SIP. While it is true that a majority of the investors choose to invest in the equity market through a Systematic Investment Plan, it is not the only way. You can choose to invest in practically any mutual fund such as debt funds, money market funds, balanced funds, or Gilt funds through an SIP.
A Systematic Investment Plan is one of the most flexible investment strategies out there. It allows for a great degree of customization. And this flexibility and customization is not only restricted to the point of creation of the SIP, but can also be utilized after it. For instance, after the creation of an SIP, you can choose to modify the tenure and the amount of investment later on at any point in time.
Just because the minimum limit of investment for a Systematic Investment Plan starts at Rs. 500 per month doesn’t mean that the plan is suitable only for small investors. In fact, with most SIPs there’s generally no maximum limit of investment that you can make. This effectively means that you can invest as much as you can afford to, meaning that Systematic Investment Plans are suitable for all kinds of investors and not just to a certain section of them.
Another widely propagated myth about SIPs is that they’re not useful during a bull market. On the contrary, one of the primary advantages of a Systematic Investment Plan is that you don’t have to time the market. During a bull market, you purchase less number of units and during a bear market, you purchase more units. When done for a sufficiently long period of time, the cost of investment will ultimately average out.
Interested in getting started with an SIP? You would have to first possess a demat account. If you don’t have one, you can simply visit the website of Motilal Oswal to open a demat account online for free. So, what’re you waiting for? Get started with your investment journey right away.
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