Curated By: Business Desk
Last Updated: August 04, 2023, 11:37 IST
SIPs may not yield significant profits in the initial years or months.
To maximise your return on equity mutual fund investment, it is advisable not to withdraw your SIP plan at a low market price.
A systematic investment plan (SIP) is considered one of the best and safest investment options in mutual funds. Every investor seeks a safe and secure plan that provides higher returns.
SIP operates on the principle of regular investments and helps build wealth over time. Under SIP, you can choose the investment frequency that suits your convenience- weekly, quarterly or monthly and the amount will be automatically debited from your bank account.
Some investors withdraw their money when the market goes down. However, there are certain things to keep in mind while investing in SIPs.
To maximise your return on equity mutual fund investment, it is advisable not to withdraw your SIP plan at a low market price. Returns tend to increase over time; for instance, if your SIP gives you a return of 44% in a year, it might provide double returns in the next five years and four times in the next 15 years. Therefore, it is always suggested not to withdraw your SIP during a market downturn.
It may happen that when your SIP matures, the market is slow, or you didn’t receive the expected returns. In such cases, you can set a SIP exit date. For instance, you might start withdrawing three years before your maturity date, thus reducing the risk factor and receiving all your money gradually within three years.
SIPs are typically long-term investments and they may not yield significant profits in the initial years or months. It is important for investors to keep in mind that SIPs are intended for a longer duration. Additionally, the market is never stable and fluctuations are unavoidable but SIPs for the long term have the potential to generate good returns in the future.
While it can be challenging to invest a lump sum amount in SIP for an extended period, it is crucial to be prepared beforehand and try not to skip your SIP instalments. Missing your instalment for the first time may not incur any charges from the company but the bank might charge interest based on their policies. However, if you consecutively miss three months’ worth of instalments, your SIP will be terminated. It is always suggested to avoid skipping SIP instalments to achieve better returns in the long run.
