4 Mistakes to Avoid When Investing in Mutual Fund SIPs for a Lumpsum
Mutual Funds, Systematic Investment Plan, SIP, Investment Mistakes, Personal Finance
Mutual FundsSipInvestment MistakesPersonal FinanceLongterm InvestingReal Estate NewsAug 08, 2024
However, to achieve this, it's essential to avoid common mistakes that can hinder your SIP's growth. Here are four mistakes to steer clear of.
Firstly, finding the right SIP amount is crucial. Don't invest too much or too little. The thumb rule is that 20% of your monthly income should go towards long-term investments. When you're young, you may set aside a large chunk of money towards your investments, but as you grow older, you may need to reduce your monthly investment amount as your responsibilities increase.
Secondly, don't invest for the short-term. We all want quick rewards, but if you're investing for three years and expecting a lumpsum amount in return, it may not be possible. Investing in the stock market comes with risks and volatility, so it's essential to stay invested for at least seven years to overcome market dips.
Thirdly, don't panic when the market is down. It's normal to fear and panic when your portfolio is in the red, but don't discontinue your SIP abruptly. You can only take advantage of compounding if you stay invested for the long haul. Keep faith in your chosen mutual fund and remain patient.
Lastly, don't skip SIP instalments. Discipline is crucial to the success of your SIP. If you start your SIP and leave it halfway or skip one or two instalments occasionally, you won't be able to accumulate a large corpus. Even if you have financial constraints, ensure that you don't disrupt your SIP under any circumstances.
By avoiding these common mistakes, you can ensure that your SIP grows steadily over time, helping you achieve your long-term financial goals.
About ABC Mutual Fund ABC Mutual Fund is a leading asset management company in India, offering a range of mutual fund schemes to cater to diverse investor needs.
Frequently Asked Questions
What is the ideal SIP amount for a beginner?
The ideal SIP amount for a beginner depends on their monthly income and financial goals. A general rule of thumb is to invest 20% of your monthly income towards long-term investments.
Can I withdraw my SIP investment anytime?
Yes, you can withdraw your SIP investment anytime, but it's recommended to stay invested for at least seven years to overcome market volatility and achieve long-term growth.
How does compounding work in SIPs?
Compounding in SIPs works by earning interest on both the principal amount and any accrued interest over time, leading to exponential growth in your investment.
What happens if I skip a SIP instalment?
Skipping a SIP instalment can disrupt the discipline and consistency required for long-term growth. It's essential to ensure that you don't skip instalments, even if you have financial constraints.
Can I change my SIP amount or scheme anytime?
Yes, you can change your SIP amount or scheme anytime, but it's recommended to review your investment goals and risk tolerance before making any changes.
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