Systematic Investment Plan (SIP) has gained popularity as a favored investment option in India, providing a disciplined approach to wealth creation. Despite its widespread adoption, SIPs often face misconceptions and myths that discourage potential investors.
In this article, we aim to dispel 15 common myths surrounding SIP investments, shedding light on the realities and advantages of this investment strategy.
- SIPs are not limited to the affluent – SIPs are accessible to investors from all income brackets. With investment amounts starting as low as ₹500, SIPs offer an affordable entry point for individuals from diverse financial backgrounds to participate in wealth creation.
- SIPs do not guarantee high returns – SIPs do not promise high returns or protection against market volatility. However, they do offer the advantage of rupee cost averaging. This means that investors can purchase more units when prices are low and fewer units when prices are high, potentially mitigating market fluctuations over time.
- SIPs are not exclusively for long-term investors – While SIPs are well-suited for long-term wealth accumulation, they also cater to short-term financial goals. Investors have the flexibility to customize their SIP tenures according to their objectives, whether short, medium, or long term, providing adaptability in achieving financial targets.
- SIPs are not the same as mutual funds – SIP is a method of investing in mutual funds rather than a distinct investment product. Mutual funds offer various investment avenues such as equity, debt, and hybrid funds. Through SIPs, investors can diversify their portfolios based on risk appetite and financial goals.
- SIPs are not limited to equity investments – Although SIPs are commonly associated with equity mutual funds, investors can also opt for SIPs in debt funds. Debt SIPs provide stability to portfolios by investing in fixed-income securities such as bonds and government securities, catering to investors with a lower risk tolerance.
