SIPs: A long-term investment strategy

S ystematic Investment Plans are much misunderstood. For one, investors often mistake SIPs as an investment avenue rather than a mode of investing in mutual funds. Then there are investors who invest in SIPs expecting quick results without fully appreciating the need to invest via SIPs for the long-term.

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In an earlier article, we discussed how SIPs are perceived incorrectly by many investors as standalone investments. This explains why one of the most common queries we receive on the website is - which is the best SIP? Unfortunately, these investors have not been educated by their investment advisors about SIPs i.e. SIPs are only a mode of investing and not an independent investment avenue. Another misconception investors have about SIPs is with regards to the minimum tenure. Most fund houses have a minimum SIP tenure of 6 months. This leads investors to believe that 6 months is the ideal time frame for investing via SIPs (just like a lot of investors invest Rs 5,000 in mutual funds simply because that is the minimum investment amount for several mutual fund schemes).

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