Starting your investment journey with SIP is one of the most intelligent decisions you can make as a beginner. SIP or Systematic Investment Plan is a very simple way to invest money if your aim is to generate long-term wealth. SIP investment has the power to multiply your wealth over time because of its compounding nature. SIPs have become one of the most popular ways among beginners and seasoned investors alike. With the help of small and regular monthly amounts and a reliable mutual fund app, an SIP makes wealth creation more disciplined and easily accessible.
However, even though SIP in mutual funds is an extremely simple financial path to follow, there are still some common mistakes that a beginner might often end up making. If you are someone who is considering starting an SIP, then here are five common mistakes that you must avoid at all costs while starting your SIP journey:
- Not Aligning SIPs With Investment Goals:
Adding to the list of the most common errors that a beginner can commit is the tendency to plunge into an SIP investment without any definite financial objectives. A pre-determined list of objectives can assist you in making an informed choice when selecting the appropriate SIP for you. This will make you feel that you have a purpose and have the drive to continue with your investment path.
Choosing Schemes Without Any Research:
- No Research:
Another top mistake that a beginner is bound to make at some point in their investment journey is choosing an SIP without doing any thorough research about it. Not all SIPs are equal. There are major factors like past performance, expense ratios, fund management styles, and alignment with your risk appetite that play a key role in helping you choose the perfect plan for your investment goals.
- Stopping SIPs During Market Volatility:
This is one of the most common mistakes committed by investors. Stopping an SIP abruptly in situations of market volatility is actually more loss-bearing than profitable. SIPs are designed in such a way that they work best in times of market volatility. This is because they average out the cost of the units through a concept called rupee-averaging. Furthermore, by continuing your SIPs during market volatility, you also get a chance to buy more mutual fund units at lower prices.
- Investing Too Little Or Too Late:
Delaying your SIP in mutual funds or starting with the bare minimum amount is one of the worst decisions you could take as a beginner. The earlier you start, the larger the amount, the more likely you are to receive higher annual return percentages and dividends.
- Not Diversifying Your Portfolio:
Another common mistake that a beginner must avoid is to invest only a certain sum of money in just a single mutual fund SIP. It might seem convenient from the outside, but it is often quite restrictive. If you are planning to invest only a specific amount of money each month, then you must figure out how to diversify your investment strategy instead of pooling it all in one fund.
SIP in mutual funds is one of the simplest and smartest ways to start your investment journey. To really get the benefit, however, you should not make these common mistakes. You can make SIP investment a disciplined habit that can gradually accumulate wealth and help you gain financial freedom with the right approach and tools, including a trusted mutual fund app.