Five Rules of Investing in a Systematic Investment Plan

Posted by Dishika Baheti on February 14th, 2018

It’s good to see the investors finding trust in the SIP investment in mutual funds. The graph of the SIP has risen so high in the recent past years and this shows how people have started investing in the SIP plans in India. On the one hand, where various investors find SIP to be the best investment plans for their financial goals, only a few of them stay invested in them for fetching the real benefits. The reason for this is that people are still not much aware of the elements of SIP investments and are not able to make the most of them.

If you also want to find out if SIP is beneficial for your capital growth and attainment of financial goals, then the first thing you need to do is to get in-depth knowledge of the same. Here are the rules of investing in the systematic investment plan that will help you be aware of the very nature of investing in the mutual funds through the SIP route.

#Rule 1 - Understanding the Working of SIP

One needs to crack the misconception first that SIPs provide a fixed return at a constant rate. The truth is that there is no such concept of regular earning in the SIPs always. There comes a time as per the market performance that SIPs tend to be on the negative graph for a considerable time. However, this is the nature of this investment, it doesn’t mean in any way that one tends to lose capital in the SIP. Its nature of yielding the returns is very different from that of other investments because of which it is unique and the best. So you need to keep this fact in mind before investing.

#Rule 2 - Stay in for Long

The idea of starting an SIP for a short tenure is futile and can eventually lead to losses making your experience bad. So you need to understand that SIP means a long-term investment for at least a period of seven to ten years. It is recommended not to put money in SIP for a short term on the sake that market looks good; as the real-time when compounding kicks the investment value is after a period of five to ten years depending upon the fund you have opted for.

#Rule 3 - Don’t Be So Passionate

It’s quite surprising, but the fact is once you start your SIP investments, you must forget it. You will have to leave your money instead of regularly looking at it just to see the rise of fall. This will help you appreciate the capital because in the case of SIP, interruptions cause great failures. If you think that by keeping a check you can keep changing the portfolio, you are at some point wrong. The reason being is that it will not allow your money to avail complete benefits of the schemes in which you started your SIP. So leave it and relax, your money will come to you in manifolds in the future, and that’s what you desire for too.

#Rule 4 - Don’t Keep Changing Your Portfolio

As discussed earlier, SIP starts gaining the benefits of the scheme after a particular tenure, and if you will regularly keep changing your schemes or portfolio, you wouldn’t be able to make the most of the SIP. It will simply burn the benefits that you would have earned in the time of replacing your investment from a non-performer to a good performer fund. What you need to do is that while starting an SIP in the beginning make the right choice, so you don’t need to make changes frequently.

#Rule 5 - Link Your SIP Investments with Your Goals

The best idea of making a successful investment is to link your SIP with your life goals. Before making a decision, first ask yourself why you need to start an SIP and this will help you make a perfect buy as well as a successful investing. As we know that SIP is all about disciplined investing, by linking it to some life goals, you would be more likely to make it done in a disciplined way.

These five major rules which govern a successful SIP investment in India are important to keep in mind. If you are planning to start an SIP, then reach out for a decent online investment service provider as they will help you for sure.