When is the right time to start a sip?

Today everybody are familiar with the investment tool- SIP(Systematic Investment Plan). This is possible due to “Investor Awareness Campaigns” conducted by amc’s(Fund Houses)and by AMFI(Association of Mutual Funds of India).

Even though investors are aware of sip, there are certain myths revolving in the minds of the investors like-

SIP Myths

  • To start a SIP, we have to wait for right time(Market correction)
  • SIP is only for small investors
  • We have to select right sip date to benefit from power of compounding
  • Sip’s eradicates market volatility. It ensures guaranteed returns.
  • Sips frequency(weekly, monthly, Quarterly,Fortnightly)decides your investment returns

These are some of the “Common Myths” being circulated in investors mind. But past history proves that-

SIP Facts

  • Sips doesn’t require market timing
  • Sips can be done with larger amounts too(They are so many investors doing sips with larger amounts)
  • Sips allows “Rupee Cost Averaging” concept.
  • Sips averages out your investment cost in the long run
  • By doing sips in the “market peak levels”(Bull Market) and “market bottom levels”(Bear Markets)your sips will do “magic” in the long run

Even though after reading all these, you might be thinking over “Right Time To Start a SIP“. Before concluding which is the best time to start a sip,

  • Financial Planners suggests that “The Best Time to start a sip was Now”. The moment you realised the need to invest for your future is the best time to start a sip.
  • Don’t procrastinate on doing sips assuming you will start a sip when you have “surplus money”. Do remember you can start sip with as low as 500 Rupees(For some Fund Houses it might be lower-starts with as low as rupees 100 while some amc’s allows 1000 rupees as minimum sip amount)
  • The concept of “SIP” is itself averaging out your investments in both bear and bull runs
  • The “Magic of SIP” can be seen only if you stayed in the course for long-term without worrying on the short-term market fluctuations
  • If you are thinking that “SIP Frequency” will determine your returns, it is completely a myth. If you do daily or weekly sip you will find it difficult to estimate capital gain tax(whether short-term and long-term capital gains)and exit load,

As per income tax laws, every SIP installment is treated as “Fresh Investment”. So you may not estimate capital gains and exit load calculations on day-to-day(if you have done daily sip)or week-to-week basis(if you have done weekly sip). It is a time-consuming process to calculate them. So avoid the jargaon of heavy calculations

  • Financial Planners suggests that not to stop your sips in bear phase(Market Correction)Instead they suggest to increase your sip amount when the market corrected as it is the “Golden Opportunity” to accumulate higher units which bags “Positive Returns in the Bull Run”
  • Even though investors are aware of sip concept, so many investors are withdrawing(Redeeming)their money in the market correction. But to profit from SIP’s one has to do the opposite. He has to invest more in the market correction and book profits(if he is doing asset allocation)in bull run. This entirely depends on the investors asset allocation

On the whole, we conclude that to start a sip, there is no right time, the moment you realised to invest for future is the best time to start a sip. At the same time do remember that you need not have bulk money to start a sip. Sip minimum amount ranges between 100-1000 Rupees(Varies between fund houses). So start investing through sips right now!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: