7 Misconceptions About Online SIP Investment

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Systematic Investment Plan

• 7 Misconceptions About Online SIP Investment

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What Is Systematic Investment Plan?

• SIP or Systematic Investment Plan is a mode of
  investment through which an investor can invest
  small amount periodically in the mutual funds.
• Online SIP investment scores a point over the
  Lump Sum investment on the grounds of rupee-cost
  averaging and compounding.
• Through this mode of investment, an investor
  becomes free from the burden of timing the
  market. Flexibility and affordability are the
  other perks that comes handy with this mode of
  investment.
• However, there are still some misconceptions
  regarding the SIP investment which are busted in
  the upcomming slides.

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Myth 1 Only Small Investors Take the SIP Route

• Investors generally believe that SIP investment
  is a good pick for the small investors only which
  is a partially true.
• Remember, there is a minimum SIP amount for every
  mutual fund scheme but no maximum limit.
• Usually, the minimum amount required is Rs. 500
  but an investor can invest as much money as he
  desires.
• Thus, small investors can invest with a minimum
  of Rs. 500 but that doesn't means that large
  investors cannot deploy huge cash through SIP.
• Moreover, SIP assists in developing savings
  habit.

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Myth 2 Don't Start an SIP When Market Is High

• Generally, investors think that starting an SIP
  is a bad idea when the valuations are high as
  they would accumulate lesser number of units at
  low NAV's.
• It is again a false belief as SIP eradicates the
  stress of market timing.
• When the market is high no doubt, the fund
  managers will buy lesser units at higher NAV's
  but when the market will follow a bearish trend
  more units will be purchased by the fund
  managers.
• Thus, an investor enjoy the benefits of
  rupee-cost averaging.
• Remember, it is not about the 'right time' but
  for 'how much time'.

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Myth 3 SIP Is a Long Term Investment

• Another misconception about SIP is that it is a
  long term investment which is again partially
  true.
• The investment tenure in SIP depends upon your
  financial goal.
• If you have a short term goal then you can stay
  invested for a shorter period of time as well.
• However, SIP yields good returns in the long
  term.
• Power of compounding is a powerful advantage of
  SIP which offers good results in the long term.
  Thus, it is advisable that an investor should
  stay invested for a longer period of time.

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Myth 4 SIP Provides Guaranteed Returns

• There is no place for the word 'GUARANTEE' in the
  mutual fund market.
• By an SIP plan, an investor enjoys several
  benefits like, rupee-cost averaging, compounding,
  etc., but that doesn't mean that systematic
  investment plan will offer guaranteed returns.
• It depends on the right calls made by an investor
  in the market conditions.
• However, in case of a loss, the impact will be
  lower than the Lump Sum investment.

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Myth 5 Lump Sum Investment Is Not Allowed in SIP
Fund

• Investors have a misbelief that a Lump Sum
  investment is not possible in the mutual fund in
  which he is investing through SIP.
• In case of a sudden cash flow, you can do the
  lump sum investment in the SIP fund and
  vice-versa.
• Thus, an investor can do the lump sum and SIP
  investment in the same mutual fund.

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Myth 6 An Investor Receives Entire Money from
an ELSS Fund after 3 Years

• ELSS or Equity Linked Savings Scheme comes with a
  lock-in period of 3 years. Investors think that
  the entire money can be withdrawn from the fund
  after the completion of 3 years but the reality
  lies far away from their expectations.
• In ELSS funds, each SIP investment is seen as a
  separate investment and every installment has to
  complete a lock-in period of 3 years.
• Thus, each investment should complete an
  investment tenure of 3 years before you can
  withdraw the installment amount.

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Myth 7 High Penalty Is Imposed for Missing an
SIP Date

• The asset management company do not charge a
  penalty on missing of an SIP date. However, you
  can check the charges deduct by your bank.
• Suppose, you start a monthly SIP of Rs. 500 in a
  mutual fund. Let, the fund managers buys 5 units
  having a NAV of Rs. 100. Now the month in which
  you have missed your SIP, you will be restricted
  from buying the units due to insufficiency of the
  amount.
• Therefore, it is always recommended to have
  enough cash in you bank balance so that the SIP
  installment can be auto-debited from your bank
  balance.

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Conclusion
SIP mode of investment is a disciplined approach
of investing in mutual funds that brings along
with it several benefits compared to the Lump Sum
investment. However, there are several myths
regarding the online SIP investment among the
investors. The presentation is crafted in a
manner to bust the myths. Knowing the truth, you
must have learned that SIP investment is the best
mutual fund investment option. Happy Investment!