Investing in SIP
Even though the big stock market has still not reached its value of a year ago, the SIP bandwagon is moving forward rapidly. According to the latest data from AMFI, an organization of mutual fund industry, SIP investments every month are now reaching a record Rs 30,000 crore, which is more than Rs 25,323 crore in October 2024. The money invested in SIP has now become almost 20% of the total amount of the entire industry. Indian small investors have made this a permanent habit. Like going to a mall every month. In this way, people’s confidence in investment is continuously increasing, which is clearly visible in these increasing investments.
The main reason for this is the constant communication about the benefits of SIP by mutual fund companies, their agents and financial advisors. Although this has brought investment discipline among the people, but due to this, many people, especially new investors and those who have not seen the market fall, have started feeling that if they invest money in SIP, they can never incur any loss. Some people think that SIP is a magical method which protects from market fluctuations and always gives good results. But this is an incomplete truth.
In an ET report, Nehal Mota, co-founder and CEO of Finovate, says that for many people SIP has become the easiest way to invest in the stock market. But with its increasing popularity some misconceptions have also increased. Some people have started believing that SIPs are safer or that they will always give good returns. The reality is a little different.
Are people becoming worried after investing in SIP?
The security felt in SIP is comparable to the risk involved in investing lump sum money. There is a risk in lump sum investment that your entire amount gets invested at high market levels. Nirav Karkera, Research Head, Fisdom, says that it is very difficult to catch the market at the right time and SIP makes this problem easier. While lump sum often carries the risk of buying at a higher price, SIP smoothes out market fluctuations and reduces the average cost of investment.
SIP protects from heavy shocks
Experts say that the real advantage of SIP is not that it never causes loss, but it protects from decisions taken at the wrong time and in haste. Monthly autodebit makes investments regular, giving small gains to the portfolio. SIP is not a magic cure, but a good way to handle market fluctuations. Both SIP and lump sum investment are suitable for different types of people. People with big money invest lump sum, while people who get salary every month prefer SIP.
However, experts say that your big financial goals will not be achieved just by doing SIP. Long-term wealth is not created by choosing just one method. The money should remain invested for a long time and along with SIP, the occasional lump sum should also be invested at the right time.