Myths of Mutual Funds Systematic Investment Plan-SIP

19 Dec

Myths of Mutual Funds SIP

Finheal
Mutual Fund
Tags: investment in mutual funds, mutual fund SIP, NAV, SIP
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Mutual Funds are enormously popular among investors, but do you be acquainting with how much of the information that people speak about MFs are just mythology? Maybe it’s time to put the record straight and get your facts accurate.

Mutual Fund SIP is a popular term in investment circles even although there is a definite air of confusion surrounding it. You require understanding that it is not an investment but a technique of investment in mutual funds. It is just a policy that will help out you invest better and maybe while trying to apply this method, you be supposed to be conscious of the mythology that surround it.

Myth 1: SIP stands for Small Investors Plan

One of the main and easiest myths that surround Mutual Funds SIP is this. Investors believe that it is for investing lower sums of money, but actuality is it is just a very well-organized and long-term investment plan which does not actually gets limited by amount per use. It is necessary that one should recognize that the money is invested into in a fundamental asset in a usual disciplined manner.

Myth 2: A Fund with Lower NAV (Net Asset Value) is improved

People often get the wrong idea that the NAV of a mutual fund is similar to market prices of stocks. Many mistakenly buy mutual funds with a low NAV like they buy stocks at cheaper prices. This incorrect view stems from the belief that low NAV values are associated with a potential of increased returns.

Myth 3: Halted Mutual Fund SIP leads to punishment

Many investors believe that if you commit to an investment for a long tenure, you cannot change anything; neither the amount, nor the tenure and doing so will result in punishment. But in actuality you can do all that by just giving a written request and you will be able to change the tenure, amount and even the fund type. If you really want to change the fund, you can stop the existing SIP and switch to a new SIP.

Myth 4: SIP is not working (Returns are low!)

People review their investments by their returns. So, this myth stems from the detail that people look at their total returns after short intervals. SIPs are first and primary based on Internal Rate of Return or IRR of the investments. In the short term the complete returns clearly stays lower than the IRR because you spend in SIPs from time to time as an alternative of investing at one go. If you want to have good returns, then investing at regular intervals through a long term period.

Myth 5: Mutual Fund SIPs are only Long Term

Investors get actually puzzled and this seems to be a well-liked myth those requirements to be busted. Mutual Fund SIPs can be enrolled for six months if require be and that is the minimum tenure. But the investments in that tenure require being long term in nature. Despite the fact that the investment time can be short term, the holding time carried out through mutual fund SIP should be long term.

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Finheal

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