206809 SIP myths you must know!
Indian stock markets have overcome all odds and posted their best performance in a decade in FY21
One of the biggest lessons COVID-19 has taught is to never let a good crisis go to waste. In the last financial year, there was corona, lockdown & negative GDP but Indian stock markets have overcome all odds and posted their best performance in a decade in FY21.
Similarly, due to the massive awareness initiative by the mutual fund industry, we are now well about the fact that Systematic Investment Plans (SIP) are good EMIs and help in wealth creation over the long term. Looking at the returns delivered by stock markets over last year many retail investors are now confused whether they should opt for a SIP in stock or SIP in mutual funds. For that let’s first look at what is SIP in stocks.
SIP in stocks
A SIP in stocks works on the same principle as the systematic investment plan in a mutual fund. You buy shares instead of mutual funds units.
You can do a SIP by purchasing a fixed quantity of shares at specific intervals of time or stocks within a fixed amount at regular intervals. For example, you may consider buying five shares of HDFC Bank or any other company each month. Alternatively, you can select a certain amount, for example, a sum of Rs 5,000 to purchase HDFC Bank shares monthly.
You can even do SIP in shares of more than one company subject to your investment capacity.
Now, let’s understand the difference between SIP in stocks & SIP in mutual funds.
To conclude, each investor is unique, also the pros and cons of investing through SIP in stocks and SIP in mutual funds are different. Hence, one should select the strategy keeping in mind individual’s risk appetite and financial goals one needs to achieve.