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Top 4 Mistakes to avoid while investing in Mutual Funds through SIP​

Want to create wealth with mutual funds but not sure where to start? Sometimes it can be better to focus on what not to do rather than what you can do. As you embark on your mutual funds journey enjoying the benefits of low SIP investment amounts, ease, and convenience, try to keep an eye out on other factors too. Some mistakes can come in your way of building wealth. Let’s find what these are and how you can avoid them to maximize your earnings:

1. Not having a clear picture of your goals:

There are different types of mutual funds, and each can cater to a different type of goal. You can decide the right SIP investment on the basis of your financial objectives, risk appetite, investment horizon, etc. Start by asking yourself the following questions:

o Are you investing to save tax, or is your goal capital appreciation?
o What are your liquidity requirements and concerns?
o Do you want to save for the long-term, or do you need to go forshort-term generating funds?
o Are you saving for retirement or a child’s higher expenses?

The answers to these questions, along with the proper understanding of your goals, can help you pick out suitable mutual funds and ultimately create the kind of wealth you wish to.

2. Starting a SIP in a scheme not suitable for you:

As explained above, the decision to pick a mutual fund depends on your goals. If you are a conservative investor with a low risk appetite but end up picking equity mutual funds, you may regret your decision and be stressed about the performance of your investment. Therefore, it is advised to weigh in all the pros and cons before you start a SIP investment.

3. Not being regular with your SIP investment:

As with most other things, time and discipline play an important role in mutual fund investing too. A lot of people waste crucial time waiting for the perfect moment to start with their SIP investment. Remember,the only good time to start investing is now! Mutual funds work on the power of compounding. So the sooner you start, the better can be your overall earnings.

In addition to this, being diligent and never skipping a SIP is also essential. Every SIP that you skip is an opportunity lost. Over the course of time, this can be a lot more overwhelming than you can imagine right now. So, try to be regular regardless of the market volatility.

4. Choosing the wrong SIP amount

Look at factors such as inflation, the investment horizon, your current income and expenses, and the risk associated with your SIP investment. Moreover, aim to pick a SIP amount that does not interfere with your present lifestyle to minimize the chances of skipping SIPs due to insufficient funds later. You can also use a mutual fund SIP calculator to get a better idea of how to plan your SIPs. A mutual fund SIP calculator is an online tool that can help you understand the future prospects of your investment.

It also helps toincrease the SIP amount with time to counter inflation. You can use your increments, bonuses, or cash gifts to invest in appropriate mutual funds with top-up SIPs.

To sum it up

Avoiding these four SIP investment mistakes can help you get the most out of your mutual funds. So, keep an eye out for them and try to avoid or rectify them.

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, affiliates or representatives (“entities & their affiliates”) 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 affiliates 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.

Disclaimer for Calculator: The results are based on an assumed rate of return. Please get in touch with your professional advisor for a detailed suggestion. The results are based on an assumed rate of return. The calculations are not based on any judgments of the future return of the debt and equity markets / sectors or of any individual security and should not be construed as promise on minimum returns and/or safeguard of capital. While utmost care has been exercised while preparing the calculator, NIMF does not warrant the completeness or guarantee that the achieved computations are flawless and/or accurate and disclaims all liabilities, losses and damages arising out of the use or in respect of anything done in reliance of the calculator. The examples do not purport to represent the performance of any security or investments. In view of individual nature of tax consequences, each investor is advised to consult his/ her own professional tax/ financial advisor before taking any investment decision.

Mutual Fund Investments are subject to market risks, read all the scheme related documents carefully.

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