Investment Tips: If you invest in mutual funds through SIP, then remember these five lessons..

In the last few years, the number of people investing in mutual funds through a Systematic Investment Plan (SIP) has increased rapidly. This trend has become common in villages along with cities, where people used to traditionally invest in bank FD or post office schemes for savings or retirement.

However, while investing in mutual funds through SIP, some people make big common mistakes. Due to this, they do not get as much return in the long term as they should. Let us know what is SIP, what are its benefits, and what things should be kept in mind while doing SIP.

What is SIP
For some time now, the stock market has been witnessing a great boom. In this, most of the stocks have given great returns. But, this is not always the case. After the boom in the market, there is also a period of recession and at that time there is a sharp decline in the shares. It is very difficult for a common investor to guess such fluctuations and make investment decisions based on that. SIP is the best option for such people.

Benefits of doing SIP
By doing SIP, you get the benefit of the magical power of compounding. This means that the extra money you get from your investment is also invested and this gives you strong returns in the long term. In SIP, you also get the benefit of averaging. For example, in SIP, the fund house buys a stock at a high price. When the market falls, the same stock will also become cheaper. This will improve your average cost.

Remember these lessons
Decide the amount of SIP according to your financial situation. This means that even if you face the most difficult financial situation, you will be able to continue your SIP.

Never judge SIP by short-term returns. Not by a few months. SIP always gives good returns in the long term, so plan it accordingly.

You should consider more than one SIP. Investing in a single fund carries more risk. You should invest in a balanced manner in debt, equity, and other asset classes.

You must check the expense ratio while doing SIP. If the expense ratio is high, your returns may be low. Also, keep in mind the entry and exit charges as well as additional charges.

It is also important to review your SIP regularly. If your fund does not perform well compared to competitors and the market for a long time, then you should also consider changing it.

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