By: Value Research
Your returns depend on the performance of the assets you invest in, not the investment plan itself. While SIPs help spread your investments over time, reducing risk compared to lump-sum investing, it doesn’t guarantee better returns.
Another myth surrounding SIPs is that they shield you from market downturns. However, this isn’t true at all. When the markets are on a decline, your investment will also fall and may even turn negative.
On the contrary, SIPs provide you with the flexibility to modify your investment amount and tenure at any time. You can even request the fund house to stop your SIPs if need be.
A common misconception among investors is that increasing the frequency of SIPs will lead to greater returns. However, a higher frequency will only introduce unnecessary complications when managing or monitoring your investments.
Missing your SIP by one or two months won’t invite a penalty. But, if you miss your SIP instalments for three consecutive months, there’s a risk that your investment might get cancelled. In that case, you will need to apply for a fresh mandate to restart your SIP.
Investing through SIPs is recommended even for non-equity funds since it prevents needless spending and inculcates a disciplined approach to investing.
To find out why this is not true, we suggest reading the full story by clicking on the link below.