subject: Busting Systematic Investment Plan Myths [print this page] If you're considering investing in systematic investment plans, then you're likely wondering about which are the facts of the matter. There are several mistaken points in SIPs which are simply accepted as fact. One such thing is you would have to invest with equity or unit linked investment plans (ULIPs) with systematic investment plans. This isnt generally true. Usually equity investments and ULIPs are long term. You only use SIPs if youre investing for a period of less than five years. A common problem is also when investors panic because they've missed paying a months SIP. Well, you dont need to panic if you happen to miss one. Generally, sheer discipline should ensure that you dont miss out on your payments. But if you do happen to miss one, then that isnt a problem either. Just make sure you dont keep missing out on making the payments.
You also shouldn't think that there are some blocks on using SIPs. It doesn't matter if you happen to be a small or big investor a systematic investment plan is useful for pretty much everyone. You can start small and as your income increases, you can also increase you investment levels. But the fact that you don't have a large enough sum or that you have to pay periodically shouldnt be a deterrent to you. After all, the entire plan of an SIP is that you can invest without having to bear an immediate burden of hunting for finances. An SIP is, at the end of the day, only a method of investment so that you don't have to worry about getting enough money together. It isnt an investment scheme. This is why you dont need to depend on market prices to decide whether or not to take up and SIP. SIP can help you to invest, but the stocks you invest in are something that you need to make a call on.
If you happen to believe that investing with an SIP doesnt help you to grow your money, then consider whether youve invested in a right fund. Your money might not perform as well, if it is under a fund manager that doesnt know what hes doing. Another problem could be that you haven't diversified your investments, which means that when a sector fails another sector doesnt compensate for the loss. Having a diversified fund is the basis of a well balanced portfolio. This isnt something that you want to compromise on. And if youve got the right fund manager and investments which are well diversified, then theres no reason why mutual fund SIP as an investment method shouldn't work out for you.
