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10 Mistakes You Must Avoid While Calculating SIP

SIP (Systematic Investment Plans) is an effective tool that can turn small amounts of money into a big amount after a certain period of time. By investing regularly, the investors are creating effective means of generating an alternative option of income. In such a scenario, the SIP investments have emerged as one of the most successful options that allow the investors to create substantial wealth irrespective of their current financial standing.

While a lot of us are aware of SIP schemes and its benefits in our lives, most of us tend to make major mistakes when it comes to investing money and maintaining the same. Many websites like make this process hassle-free with their SIP calculators. However, there are certain factors that you keep in mind nevertheless. Here are some of the common SIP mistakes that you must avoid:

  1. Investing Higher Amounts: The fundamental characteristic that distinguishes SIP from other modes of investment is that you need to deposit small amounts for a considerable period of time. However, if you are committing to invest a huge amount every month and then, if you fail to continue the same for some months due to lack of savings, then you might lose the avenue of investment for the particular months.
  1. Waiting for the Right Market Conditions: Several investors wait for the right market conditions to come up while investing. The trick to wait for the market conditions to turn out favorable can work only if the investors believe that the market is overvalued. However, one must realize that it is extremely difficult to correct the market conditions.
  1. Not Going with the Bearish Markets: Instead of following this investment trend, the investors should try to stay invested in the rising markets and should invest in the lower markets. The investors who are investing with the help of SIPs tend to redeem the SIPs during the falling markets. However, it can be a big mistake.
  1. Choosing Dividend Over Growth: As an investor during the time of choosing the particular fund for investing, you should have two options: dividend or growth. In the growth option, no dividend is paid or declared. Thus, the corpus continues to grow and benefit from the compounding.

10 Mistakes You Must Avoid While Calculating SIP

  1. Not Boosting the SIPs: Several investors are not aware of the fact that they can add lump sums to the same fund in the same account or portfolio even while investing a lump sum amount. Adding some amount of lump sum tends to boost the SIP. This would be beneficial in the long run.
  1. Looking for Profits in Fund with Good Returns: The greed to book profits only on the funds that generate good returns can be a major mistake. By confirming profits in the funds that have yielded high returns, you are giving up your future returns. Therefore, it is vital for the investors to recognize the funds in their respective portfolio that might not be performing well.
  1. Ignoring the Impact of Taxes: If you fail to disclose the income in your tax returns and pay the required tax, then the results could be detrimental. Therefore, you must ask the financial experts for preparing a capital gains tax statementfor your investment.
  1. Investing Without Proper Financial Plan: Majority of the investors do not have any financial plan –formal or informal. As a result, they might end up in making wrong financial priorities. Therefore, proper financial planning is essential for identifying and helping you in meeting the short-term as well as long-term objectives. 
  1. Not Monitoring the Portfolio Performance: Several investors take no interest in their own investment. It should be the responsibility of your financial advisor to review the portfolio at a regular frequency.
  1. Monitoring Portfolio Performance Daily: While not monitoring the portfolio performance at all could be a major mistake, doing it daily is also harmful. The equity markets are highly volatile. You should have a long-term horizon with your investment portfolio. Therefore, opt for only periodic performance monitoring of your portfolio.

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