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5 Common SIP Investment Mistakes You Must Avoid​​​​​

A Systematic Investment Plan (SIP) is a convenient way to create wealth and achieve various financial goals. With the help of power of compounding, an SIP has the potential of multiplying your wealth. But to leverage ideal results out of your SIPs, you must ensure that you stick to the rules and avoid the common investing mistakes with your SIP investments. As in life, it is important to learn from the common mistakes made by investors and follow your investment plan.

If you are about to start your journey as a SIP investor, here are five investing mistakes to avoid:

1.  Not aligning SIP investments with specific goals

One of the common investing mistakes made by beginner investors is to start a few SIPs without carefully considering their financial goals. This strategy is equivalent to boarding a bus without knowing the destination it will lead to.

In your life, there could be so many goals that you want to plan for, like children’s education, their wedding, or your retirement. Aligning your SIP investment decisions will give you a sense of purpose and help you make the right decisions, like which mutual fund schemes to choose, how and when to redeem the units, etc.

2.  Not monitoring SIPs regularly

Not many people realise that starting an marks the stepping stone of their investment journey, not the end. The returns you can expect from different types of mutual funds are based on market conditions. Hence, it is crucial to keep monitoring the scheme’s performance at least once a year as you move closer to your financial goals.

Periodic SIP investment review simply means checking if the chosen scheme is underperforming or not so that you can rebalance the portfolio and reconsider investing in laggard funds.

3.  Timing the Market

In turbulent times or during market corrections, many investors stop investing in SIPs as scheduled. This can be considered one of the worst investing mistakes, as pausing SIPs could prove counterproductive to their financial goals. It also increases the likelihood of missing out on the opportunity to buy mutual fund units at a lower cost.

The simplest way to achieve good returns via SIP investments is to continue investing as per the chosen SIP schedule.

4. Not diversifying the portfolio

Another common investing mistake you should avoid is to invest a certain amount only in one . While it may seem convenient, it could lead to significant losses. If you want to invest a certain amount every month, focus on gaining knowledge about different types of funds and other financial instruments that fit your profile. Once you have a clear idea of the possible investment avenues, you can spread the risk by dividing the total amount to be invested in a specific proportion. Pair the idea of portfolio diversification with regular fund performance reviews to get even better results.

5.  No Cushioning

Irrespective of your financial profile, it is important to remember that investments are a part of financial planning for life. Many individuals, in the heat of the moment or blinded by certain myths, may invest more than what they can without considering other financial needs or unforeseen circumstances. For example, if you earn Rs. 20,000 in a month, it is advisable not to invest the entire amount and neglect other financial needs in life while focusing on SIP investments only.

Conclusion

By avoiding common investing mistakes mentioned above, you will find it easier to achieve your with focus and discipline. Besides this, it is important for you to continue learning about different ways to invest, investment strategies, types of funds, and more.

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Disclaimer:
This is an investor education and awareness initiative by Nippon India Mutual Fund.
Helpful information for investors: All Mutual Fund investors have to go through a one-time KYC (know your Customer) process. Investors should deal only with registered mutual funds, to be verified on SEBI website under 'Intermediaries/ Market Infrastructure Institutions'. For redressal of your complaints, you may please visit www.scores.gov.in . For more info on KYC, change in various details & redressal of complaints, visit mf.nipponindiaim.com/investoreducation/what-to-know-when-investing This is an investor education and awareness initiative by Nippon India Mutual Fund.

The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. The sponsor, the Investment Manager, the Trustee or any of their directors, employees, associates or representatives (“entities & their associates”) do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Entities & their associates including persons involved in the preparation or issuance of this material shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of lost profits arising from the information contained in this material. Recipient alone shall be fully responsible for any decision taken on the basis of this document. Language Disclaimer:
While utmost care has been taken in translating the article into respective regional language(s), in case of any confusion or difference of opinion, article available in English language should be deemed as final. The article provided herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional advice for the readers. The document has been prepared on the basis of publicly available data/ information, internally developed data and other sources believed to be reliable. The sponsor, the Investment Manager, the Trustee or any of their directors, employees, associates or representatives (“entities & their associates”) do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Entities & their associates including persons involved in the preparation or issuance of this material shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of loss of profits arising from the information contained in this material. Recipient alone shall be fully responsible for any decision taken on the basis of this article. "ABOVE ILLUSTRATIONS ARE ONLY FOR UNDERSTANDING, IT IS NOT DIRECTLY OR INDIRECTLY RELATED TO THE PERFORMANCE OF ANY SCHEME OF NIMF. THE VIEWS EXPRESSED HEREIN CONSTITUTE ONLY THE OPINIONS AND DO NOT CONSTITUTE ANY GUIDELINES OR RECOMMENDATION ON ANY COURSE OF ACTION TO BE FOLLOWED BY THE READER. THIS INFORMATION IS MEANT FOR GENERAL READING PURPOSES ONLY AND IS NOT MEANT TO SERVE AS A PROFESSIONAL GUIDE FOR THE READERS."

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