In recent time with the declining interest on conventional investment instruments, SIPs have fast gained interest among investors and only lately it reached a record of as many as 1.5 crore SIP accounts with the MF industry.
So, here are some of the myths associated with SIP investments which an investor should be careful about.
SIPs do not lose your money: SIPs are a tool that enables investment in the asset of your choice i.e debt or equity or a mix of both. The degree of capital loss in equity funds is only minimized through SIPs and not completely eliminated. If SIP is started at a time when the market is at a high and then falls sharply, capital is sure to be lost on SIP investment as well.
As per a conducted research, it is only in a case when SIPs continue to run for four or more years that capital loss was a rare possibility. So, depending on the asset class you have chosen for the SIP, the risk of capital loss persists.
Stock SIPs or SEPs are better than Mutual Fund SIPs: The fact that SIP in direct equity helps to average the buy price for a company scrip cannot be neglected yet at the same time the risk of capital loss while investing in direct equity through SIP is higher as against fund SIPs.
Also, when investing in stock SIPs directly, you can own too many of company scrips without factoring in their independent or sector weights.