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Investing in a Systematic Investment Plan (SIP) is like growing a tree - you plant the seed, water it regularly, and let time do its magic. But many investors panic, overthink, or try to outsmart the process - only to ruin what could have been a great wealth-building journey.
So, before you let market noise, FOMO, or expert predictions mess with your investments, here are 8 golden rules to SIP investing, with witty examples to make them stick.
Rule #1: SIP is a long-term commitment (at least 5 years!)
SIP investing is not a quick-fix, get-rich-overnight scheme. It's a marathon, not a sprint.
Imagine signing up for a gym membership and quitting after two weeks because you don't see abs. That's what stopping an SIP too early looks like. Give it time, stay consistent, and let compounding do its job!
Rule #2: Market dips are your best friend
When markets fall, your SIP buys more units at lower prices - which means bigger returns when markets recover.
Think of it as your favourite Big Billion Sale on Flipkart. If a Rs 100 product is available for Rs 50, you would buy more, not less. The same logic applies to investing - market crashes are a discount sale for investors!
Rule #3: Volatility is your friend (Even if it feels like a frenemy!)
If the stock market only went up smoothly in a straight line, SIPs wouldn't exist. They work because of volatility - averaging out your cost over time.
It's like fuel prices - they keep changing, but if you fill up a little every week (SIP investing), you don't have to worry about timing the lowest price.
Rule #4: Don't stop SIPs when markets fall
Stopping your SIP when markets crash is like cancelling your wedding because of a small fight!
Imagine you're buying mangoes every month for Rs 100 per kg. One day, the price drops to Rs 50 per kg. Would you stop purchasing or buy more? Exactly. So why stop your SIP when markets are cheaper?
Rule #5: Don't overdo it when markets are high
When markets rise, many investors either panic and stop investing or go all in - both are mistakes.
This is like overeating at an all-you-can-eat buffet because the food is great today. Stick to your plate size, and don't mess with your investment plan.
Rule #6: Don't pick funds based only on past returns
Just because a stock or fund performed well in the past doesn't mean it will in the future. Choose funds that fit your risk appetite and financial goals.
It's like cricket - you wouldn't pick a retired player for your team just because he was great in 2010! Invest in what suits your current needs and plans.
Rule #7: The only time to stop your SIP? When you reach your goal!
People stop SIPs when a market guru warns them, when the economy looks shaky, or when their neighbour suddenly makes money in real estate.
None of these are valid reasons! You stop your SIP only when you reach your financial target.
It's like a train journey - you don't jump off because someone says, "This station looks nice." You stay on until you reach your destination.
Rule #8: Increase your SIP over time
As your income grows, your SIP should too! A step-up SIP helps you invest more without feeling the pinch.
Think of it like upgrading from a scooter to a car as your salary increases. The faster you move, the sooner you reach your goal!
Bonus Tip: How to avoid panic with SIPs
Market crashes will happen. If you panic every time, investing is not for you.
Solution? Stop checking your portfolio daily! It's like weighing yourself after every meal - you'll only stress out. SIPs work best when left alone to grow.
Final Thought
The secret to successful SIP investing? Patience, discipline, and ignoring short-term noise. Let the markets do their thing. Stick to your plan, trust the process, and watch your wealth grow.
Happy Investing!
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Also read: Seven common SIP myths busted
This article was originally published on February 13, 2025.
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