Outlook Money
SIPs are a preferred investment option for a wide range of individuals, from beginners to experienced investors. They provide a straightforward, disciplined, and efficient investment strategy that caters to people from diverse income levels.
1) Not having a defined Goal- Investing in SIPs without defined financial goals is a common mistake among beginners. Whether one is saving for a dream home or a comfortable retirement, having a goal is beneficial. Lacking a clear goal might result in setbacks in investment strategy.
Initiating a SIP without exploring different funds can be harmful. To avoid this, it is better to select a mutual fund if it is well-known or recommended by experts. Every fund has its own benefits, one must see what matches the requirements the most.
A common mistake made by beginner long-term investors is giving in to market anxiety and ceasing SIPs during low market phases. It's crucial to understand that market fluctuations are typical. Reacting with panic or stopping SIPs during downturns can lead to losses and hinder investors from benefiting from one of SIP's key advantages, 'rupee cost averaging'.
Focusing on the recent or short-term performance of a mutual fund when selecting it can be an error. Short-term outcomes might be fleeting, but examining the long-term performance provides a clearer perspective. A reputable fund with a history of strong returns may temporarily underperform due to current market volatility.
For those new to investing, it's easy to become overly enthusiastic during a bull market or overly pessimistic during a bear market. It's important to remember that the market doesn't always rise or remain in a downturn. Hence, having unrealistic expectations can lead to negatively affecting strategy and returns.
Compiled by Syed Muskan