SIP (Systematic Investment Plan) is one of the most efficient ways of investing, especially for those who are not so well-versed in the stock market but would still want to explore the same. Below are the most common mistakes that can reduce your SIP returns.
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Timing the market
People often try to time the market and increase or decrease the SIP amount based on their analyses. The whole idea of the SIP is to stay invested for the long run and let the fund manager take care of the rest.
Choosing the wrong fund
You must identify your goal and choose a mutual fund accordingly. Often the wrong choice of funds leads to lesser returns over a period of time.
Skipping monthly SIPs frequently
Skipping your SIP amount regularly is a bad practice. Once in a blue moon is understandable. But people often make it a habit of skipping their SIP frequently.
Investing in Too Many Funds
Another common mistake that people usually make is by investing in multiple mutual funds. You should link each goal with one mutual fund at the most. You should only link it with at most two mutual funds for diversification, not more if the goal is too far away.
Not reviewing your portfolio regularly
Another common mistake is reviewing their portfolio too often or too rarely. The purpose of periodic portfolio reviews is lost if you don’t review and make adjustments as and when required.
You must consult a professional adviser before making a decision that could impact your overall portfolio. SIPs are a reliable tool for wealth accumulation, but avoiding common mistakes is essential to maximize your returns. Stay disciplined, stay informed, and align your investments with your financial goals. Regularly review your portfolio and seek professional advice.
