3 Questions To Ask About Systematic Investment Plan (SIP) Before Investing Money

Updated: Sep 16, 2020


In the last blog, I had ended with a note: whether one should invest in a Smart Investment Plan. In this article, I will thoroughly explain the concept of SIP.

Before proceeding with investing in any funds, one must ask themselves these three questions:

  1. When shall I invest and withdraw my money?

  2. Should I invest in a single scheme or multiple?

  3. Most importantly, how to manage my funds and track the investments?

As technology has progressed, human beings have become smarter. This smartness doesn’t refer to the common sense and sense of humour, but to the smart appliances that have made our lives simpler: smartphone, smartwatch, smart tv, smart bulb, smart washing machine, smart refrigerator with a smart locking system, smart car, etc.

In this era of smartness, why not go for smart investments as well? Very often, people systematically invest in plans. It is important to keep in mind the 3 questions I asked you above. Let’s look at them below-

When shall I invest and withdraw my money?

One must always know when to invest in a mutual fund and when to withdraw. You must have heard “Long term main mutual fund sahi hai” in many advertisements or even from your investment advisor. Yes, a mutual fund is generally correct for you in the long term.

However, during March 2020 when the coronavirus pandemic began, it led to a lot of investors losing their last 5 years worth of gains. Do you know why? They didn’t track their investments and were not equipped with the right information as to when to withdraw.

Every mutual fund agent is talking about SIP when they should also be talking about SWP along with it. SWP refers to ‘Systematic Withdrawal Plan’. It's the same as the SIP. While in SIP we are investing, in SWP we are withdrawing in a systematic manner.

You should always invest in a mutual fund when the market is declining and withdraw your money when the market is at the top. It is alright if you do not possess the information about the market. You can ask your broker about it. A lot of stockbroking firms are also providing these services. If you wish, you can subscribe to us at Kinvesto and post a question at the forum where we will assist you.

Should I invest in a single scheme or multiple?

This is the second most important question. I am also an investor in many funds as well as stocks. I would recommend that one must diversify their investment. Investing in only one fund is like riding a bike in a race without a helmet. Although it does depend on how much you invest and the returns that you’re expecting.

There are so many schemes under Equity, Debt, Hybrid and Index Fund. All of them have different risk factors. One must know about all scheme related details before investing in a mutual fund.

Which takes us to our last question.

How to manage my funds and track the investments?

Investment in Equity or in mutual funds is always subject to market risk. Very often, people invest money in the market and forget about it for years. I will suggest that you should always track your investments on a monthly basis.

As mentioned earlier, in the month of March 2020 a lot of people had lost their last 5 years worth of gains because they were not tracking their investments. There are many software available on the Playstore and app store that you can download for this purpose.

Feed your investment details such as the scheme name, investment date and the price. Now just open that app and assess your investments on a monthly or a quarterly basis. If the market is going up and your portfolio is giving negative returns, take advice from your advisor.

At last, I would say “SIP sahi hai, lekin SWP bhi zaroori hai”

Asking yourselves these three answers can make you a smart investor. You can ask any questions that you might have related to the stock market and mutual funds. We’re here to help you! You can make profits even in a declining market. Wondering how? Subscribe to Kinvesto and we will answer you!

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