Debunking SIP myths and misconceptions

Debunking SIP myths and misconceptions

As investors, we are frequently prevented from making the best investment decisions because of public perception of the product. The majority of popular opinions are based on half-truths. As a result, they live and operate on the basis of myths that have been so widely accepted that they have practically become a reality.

They are, however, myths that facts can only disprove. There are certain misconceptions about Systematic Investment Planning (SIP). Despite the most outstanding efforts of advisors and professionals to refute such falsehoods, they remain and continue to pique public interest.

As a result, this is yet another attempt to dispel such misconceptions and bring SIP closer to the realities that constitute this type of investment.

  • Guaranteed returns
  • One widespread misunderstanding is that investing in a SIP will guarantee you profits since your funds will be placed in the same type of investment on a regular basis.

    While no investment will guarantee you a profit, investing in a systematic investment plan (SIP) gives you a higher chance of making profits than investing in a more directly market-linked product. This is due to the rupee cost averaging theory, which allows you to hedge against market volatility by investing over a prolonged period of time.

  • To invest, you must be an expert.
  • False! Knowing anything about mutual funds is usually beneficial, but having little or no information is not a disincentive to investing. On the other hand, mutual funds offer a platform for people who wish to build wealth or achieve financial goals since their assets are handled by skilled and experienced fund managers and analysts.

    Financial experts or financial advisors are prepared to support and aid in making judgments if an investor wants to learn more about participating in a specific Mutual Fund scheme or its record.

  • SIP mutual funds vary from lump sum mutual funds in several ways.
  • This misconception affects a large number of people. In reality, there are no unique SIP investment plans. SIPs are only a type of investment.

    You can start a SIP in any mutual fund scheme, but you should choose one based on qualitative factors like investment processes and systems, fund manager expertise, degree of innovation, and so on, as well as quantitative factors like rates of return, risk, average Assets Under Management (AUM), cash flow, expense ratio, portfolio attributes, and etc.

  • Only for Equity Markets
  • The lack of understanding regarding financial instruments in the general public is apparent when you understand that some of the misconceptions are somewhat conflicting. SIPs are sometimes misunderstood as exclusively investing in equities securities or the market.

    Because the equity markets are infamous for being unpredictable and impacted by a variety of concerns, including geopolitical, socioeconomic, and sociological difficulties, both regionally and globally, this misperception turns into mistrust.

    Several investors are concerned about this since it diminishes the odds of making a profit. This, however, is not the case. In reality, you can pick the type of asset you want to engage in with your SIP investment plan. You may choose the type of security to invest in based on your objective, requirements, and risk tolerance, giving you control over your finances.

  • Missed SIP instalments result in a penalty.
  • SIP payments are deducted from your bank account on a certain date, according to the mandate you provide. In order to fulfil SIP instalments, you must keep a positive balance in your account. Don’t panic if you miss your SIP instalment for 1-2 months due to unforeseeable reasons.

    There will be no penalty, and your SIP account will remain operational. After establishing a balance in your account, you could resume your SIP. Kindly be informed that if you miss your SIP three times in a row, your bank will revoke your SIP mandate. In such a situation, you’ll need to file a new mandate in order to restart your SIP.


    Opinions frequently attract the public’s interest. However, before anything can be regarded as facts, the degree of truth in it must be investigated. Myths function in the same manner.

    They’ve been spreading along with the facts for as long as the facts have existed, making it impossible to distinguish between truth and myth. Systematic Investment Plans have taken the same hit from misconceptions, making it difficult for investors to invest without being concerned about the different rumours that are circulating.

    Instead of listening to disaster stories that serve to emphasise the truth, seek out some successful stories, and your reasonable mind will be able to distinguish between fiction and fact.

    As a result, you’re one step closer to uncovering the realities that have been lying in plain sight. Consult a financial advisor, put down your long-term objectives, and review your risk tolerance.


    CA Mukesh Gupta
    CA Mukesh Gupta
    Mukesh Gupta is the founder and director of Wealthcare. He is Fellow chartered accountant, Certified Financial Planner and Certified Public Financial advisor. He is in financial services industry since 1994. He conducts free money management sessions for corporates and associations on topics related to Personal finance. His previous engagement was with Birla Sunlife group. He regularly writes on topics related to Personal finance and occasionally appear on electronic media.

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