In this article, we will discuss the 6 common mistakes that investor makes whole doing SIP in mutual funds. So, let’s discuss what are these mistakes and how one can avoid them.6 Common Mistakes:
1) Low SIP Amount:
- An individual needs to understand that a low SIP amount will not help him/her achieve their financial goals.
- The SIP amount should be enough and should be in line with the requirement for the fulfillment of financial goals.
2) Short-Term SIP:
- An individual should not do short-term SIP for a 1-year, 2-year, or 3-year period or other short-term SIP which will not help the individual to gain some wealth.
- One should opt for perpetual mode while doing SIP in the mutual fund. In the case of perpetual SIP, one can also pause/stop the SIP, if he/she doesn’t want to continue the SIP in the fund.
- One who creates SIP brings financial discipline to the individual.
- Around 40% of the SIP done in the mutual fund via online mode, gets closes within 6 months.
3) Getting married to an AMC:
- One should not get attached to the funds of only one AMC. He/She should diversify their mutual fund allocation among various AMC.
4) Not-Doing Step-Up SIP:
- An individual should step up their SIP amount with the increase in income.
5) Cancelling the SIP when Markets are Low:
- Investors generally cancel their SIP when markets are at a low or there is a fall in the market which one should completely avoid it.
- Instead, when the market is falling it is the best time to invest more in the mutual fund, as one will get more units of the fund.
6) Timing the SIP:
What Should Investors Do?
- The biggest mistake one can make while investing is timing the market that too timing the SIP in the mutual fund.
- When one is having a longer period objective of investing, he/she should not see where the market currently stands and should SIP immediately.
A systematic Investment Plan (SIP) is one of the best modes of investing one should opt for if he/she brings financial discipline in themselves. The above-discussed mistakes are some mistakes that might impact the financial goals and wealth-creation process and therefore one should be strict with their SIP and should follow a disciplined approach while investing in mutual funds.