Investing in SIP is a very crucial task and should be followed by thorough research and analysis of every possible aspect. It is observed that if the clients are not able to get the desired output from an SIP plan, then they tend to find fault in the scheme. But, various other factors are affecting the growth and return percentage of any scheme. So, one can conclude that the triumph or failure of any of a Systematic Investment Plan depends on an investor in the first place. Clients in their haste, take investing decisions which not only make them suffer a financial loss, but demotivates them to deal further with mutual funds.
What does an SIP actually mean?
Before jumping directly to the errors, we must understand the meaning of SIP plans. In financial terms, SIPs can be termed as a method to invest in any of the mutual fund schemes by following a regular investment pattern. In layman terms, an SIP plan is an investment method which allows the clients to develop a continuous process of investing in mutual funds.
Analyzing the reasons for failure: A single factor cannot be held responsible for the failure of any scheme. There is an array of reasons which makes the clients suffer a loss in their SIP investments. The clients need to be very careful while picking up an SIP scheme and then maintaining it. Here are some following eye-opening points which would revamp your investing principles.
Investing through SIP for a short-term: Clients often take SIP investments to be equivalent to the stock market investments. So, they try to find the correct time to invest in mutual fund through SIP and redeem that investment soon. It is true that mutual funds are taken to be a proxy for the stock market, but unlike the equities, mutual fund schemes require time to show the required returns for the investments. SIP investment is a step by step process which allows the clients to follow a consistent investment strategy. However, it must be adopted for a longer duration to get the maximum returns from it.
Every SIP plan has an objective: A Systematic Investment Plan proves to be a common way through which any client can invest in a mutual fund scheme. But, each scheme has a different objective and has been launched into the market to serve some purpose. Even if an AMC launches two SIP schemes under one category, they will differ in their objectives. One might be a large-cap fund while others may deal with the diversified equity. This implies that the clients first should understand the aims of the schemes and then decide whether or not to invest in that particular scheme. If the investors put their money in a plan randomly without knowing its fundamentals, then they might have to bear a loss.
Quick returns are a far cry: SIP investment is not for the clients who want to have immediate returns from their investments. Expecting SIP schemes to deliver returns over a short period will undoubtedly lead the clients towards dissatisfaction. SIPs are undoubtedly very great plans for investing in mutual funds. However, they might allow the clients to invest in short-term schemes like liquid funds. The returns from such investments are also subtle. To attain copious returns, the clients need to keep their perspective wide and maintain their investment for quite a long spell of time.
Each investor has different needs: When we are with our friends, we discuss a lot of things from weather to trending fashion and career to investment. During those chit-chat sessions, we often discover that some of our friends have earned copious returns from their investments. And then without giving it thought, we tend to pick that scheme for deploying our money. Although those SIP plans might have proved to be a turning point in the investment cycle of our friends, it does not mean that it will benefit us too. The reason being the difference between every individual investor’s needs for investing. A particular SIP plan might prove to be beneficial for your friend as it may coincide with his/her wants. But, the same scheme might not turn out to be beneficial for you as your expectations may be different. Thus, one must identify their requirements and then invest in a SIP scheme.
Thus, by paying heed to the points mentioned above, clients can reach the heights of SIP investment that too without much efforts.
The author is a learned professional investment expert. She has been dealing with companies like Birla Sunlife Mutual Fund sine a long time. Her article have enticed the clients towards following the path of mutual fund investing through SIP plans rather than directly saving.