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.
- 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:
- 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.
What Should Investors Do?
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.
Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent are commendation to buy or sell stocks or MF.