Since the last few years, people are increasingly showing a positive approach to investing in mutual funds. Various form of investments such as SIPs has widened the avenue for the investors by making the investment process more convenient. However, paving the way is not enough unless the investor has a proper insight into investments.
When an investor is investing in the mutual fund via SIP or by any other form, they need to be aware of certain factors and mistakes. After all, an investor’s objective is to make a productive investment.
Therefore, considering certain online tools like the SIP calculator can help you in stepping towards a gainful goal, and at the same time, you also need to be aware of some common mistakes made while investing in the form of SIPs. So that one can become aware and do not fall prey to any of these mistakes, some of them are mentioned below.
1. Opting for an Incompetent SIP Amount
When you are investing in a mutual fund via SIP, make sure that you are aware of your investment to get the proper return. In general, most investors tend to invest in a small amount when investing via SIP. These may be because of the fact that they do not have an adequate amount of money to invest.
However, to make a gainful return, one must subsequently increase the size of their investment. SIP calculator helps in forecasting returns, thus helping to identify a gainful return form one that is not.
There are a lot of investors who make lumpsum investments in mutual funds via SIP without proper research or analysis. These make their investment more ineffective and reduce the chance of making a gainful return. Therefore, in order to avoid the loss, an investor should always consider the right size of investment schemes so that they can maintain the investment on a regular basis.
Furthermore, before investing the investor should monitor the investment scheme closely and use a SIP calculator to estimate returns so that it doesn’t end up becoming an incompetent SIP amount.
2. Investing for a Short Tenure
Most of the investors who invest through SIP has the objective of making a short term gain. These are one of the major mistakes which an investor should avoid in order to deal with a higher risk of the market portfolio effectively. When an investor opts for short term investment, they are more prone to face a higher risk. Moreover, it’s unlikely that an investor can make a gainfull return on short term investment.
Therefore, to make a profitable return on the investment, an investor should always opt for a long term investment scheme, especially when investing via SIP. Investors can also consider a SIP calculator as it helps you in giving better estimation. Historical performance for various return has indicated that a gainfull return in most cases is associated with a long term investment.
3. Abruptly Stopping Investment in SIP
A down market condition always tends to have a negative impact on the investors. Sometimes investors abruptly stop their investment, considering it to be a loss. But when an investor is investing through SIP try not to get influenced by the downmarket condition as one must keep in mind that the market can be volatile.
Instead of panicking, it will be a wise idea to keep investing at a regular interval when investing via SIP. In addition to this, investors can also consider buying more mutual funds at a lower price when the market is down. In the long run, there is always a positive chance for investors to rip on the benefit of their investment.
4. Preferring Dividend over Growth
The investor should, first of all, need to understand that the benefit of SIP lies in compounding. It is a process where the interest on the return over past investment is kept repeating so that it creates a chain of interest and gives you a reasonable return for a long time period. However, in most cases, instead of compounding the dividend, the investor prefers a dividend payment. Therefore, it reduces their chances to make a more gainful return in the long run.
Compounding the investment is always a better option unless one has that sufficient income to back their investment. The returns of compounding can be estimated beforehand using a sip calculator. In the long run, the growth of investment will only benefit the investors, but the investors should assess their capability before compounding their investment.
5. Picking the Wrong Fund
The investors are always suggested to have proper research before making an investment. But in reality, most of the investors make an investment based on an abrupt decision. Thus, it leads to an unproductive investment. To avoid abrupt decisions, one must strategically plan and calculate the return on investment in SIPs. This can be done easily using a sip calculator.
Therefore, when an investor is making an investment in mutual funds through SIP, they should first of all check the portfolio of the various schemes. Moreover, the risk factors and the liquidity of the fund should also be needed to be taken into consideration in order to make a productive investment.
Investing in a mutual fund through SIP can help you in reaching your goal if you invest in an organized and disciplined way. Going through the above-mentioned mistakes will not only help you in making your investment more productive but will also help you to reach your goal in a more effective way.
Moreover, there is a correlation between investment and return and the productivity of which depends upon how effectively you widen your scope of investment in the mutual fund.