Advantages & Disadvantages of SIP. Where to start best SIP?

In today’s time people have increased their focus on investment and learned its importance. In this investment one option is Mutual Funds. More than mutual funds SIP is getting more affection. So, today in next 5 minutes you will study about SIP and advantages and disadvantages of SIP.

Table of Contents :

• What is SIP
• Advantages of SIP
• Disadvantages of SIP
• Which Mutual Funds to Invest
• Conclusion
• Learn More

SIP is a method to invest a fixed amount on a particular decided time horizon. SIP is basically done for a decided goal. With SIP, a fixed sum debits from your account regularly (monthly, quarterly, weekly, etc.). This amount regularly invest in Mutual Funds you have chosen. There are many advantages and disadvantages of SIP.

Now lets understand Advantages & Disadvantages of SIP:-

Advantages :-

1. Disciplined Saving:-

This is the method by which a salaried person or any other also can save money with discipline and can have a good corpus for the future goals , if goals are to come over a long time. In normal scenario it is not possible to save fixed amount every month because we spend that money in different type of expenses. But if a fixed amount will deduct regularly then it is quit possible easily.

2. Beat inflation:-

It is the option of investment by which an individual can beat inflation. If we calculate inflation then its around 6%-7% every year. In banks FD we get 5%-6% returns and we even not possible to beat the inflation rate and our money never grows. But, SIP in direct Equity solve this problem because as per history it normally give 12–14% returns in long term.

3. Not need expertise:-

Every individual can’t be expert in one field but every individual needs money. So SIP can solve this problem. The job personal who is investing does not need expertise and study the market, because here funds are managed by professionals . We just pay nominal charges and the fund manager will do the complete study.

Disadvantages :-

1. Finding the fund:-

The individual needs to find the fund in which he is to invest is not an easy job. Sometimes in direct equity some funds not perform in that way for which we invested so that can be the risk. But for this you can take any experts advice and convert that drawback into bliss.

2. Emotions factor:-

Emotions play a big role in Direct Equity investment. Some fund manager thought that its not their own money and they not have fear to loose their money because they are getting fixed salary. They do not have emotionally connection with that money so due to this some take extra risk which bring to real risk of investors.

3. Not good for short term:–

If someone want to invest money for 2–3 years or less then SIP in equity fund is not the good option. Because market can remain irrational for 2–3 years also & in exceptional situations even more and we will not even get benefit of FD returns.

There are many advantages and disadvantages of SIP but to solve the problem how to find the best Mutual Fund looking at the above disadvantages we have bring a list of funds in which you should invest. We have handpicked and also personally investing in some funds. You can invest in those funds as per your risk appetite and after consulting your financial advisor.

(a). SBI Nifty Index Fund :-

This fund is totally based on Nifty50. All stocks that are included in this fund are of Nifty50. The big advantage of this fund is that it is more safer and simple option because we don’t need to study which companies are included in this fund. This is one of the best option for low risk investors who want to invest in Direct Equity.

The person who want some steady returns up to 12%-14% with very low risk can invest in this fund because Top 50 companies are included in this fund. The reason why this fund has been chosen is its Expense ratio and Exit Load. Also if we are thinking of the safer option than SBI Mutual Fund is the best and NO.1 fund house in India in terms of AUM (Asset Under Management).

(b). SBI Contra Fund :-

Contra Funds are that funds in which the fund manager invest in those stocks which are under performing currently but can have better growth in future. These are the contrarian funds and can have risk in short term. These can take time in performing as compare to normal funds but in same way these have more potential to provide big returns.

If we talk about its objective, the scheme seems to provide the investors with the opportunity of long-term capital appreciation by investing in a diversified portfolio of equity and equity related securities following a contrarian investment strategy.

The reason to invest in this fund is its high potential to give big returns with some extra risk in the long run. This fund has provided returns with approximately 19% CAGR from April 2006 to Dec 2022. This fund has proved its consistency from more than 15 years. But experts consider this fund as very high risk investment option. So, the individual who consider himself as an aggressive investor can look for this fund.

(c). DSP Flexi Cap Fund :-

Flexi Cap Fund is that type of fund where the fund manager has the choice to invest in any company without any disturbance of Market Capitalization. Flexi Cap Funds can invest in any large, mid or small cap companies. The benefit of this fund is that the manager gets more options to choose the best for investors.

If we talk about objective then the scheme seeks to generate long term capital appreciation, from a portfolio which is substantially constituted of equity and equity related securities and may also invest a certain portion of its corpus in debt and money market securities, in order to meet liquidity requirements from time to time. In picking individual investment opportunities for the portfolio, the investment manager will seek both value and growth.

If we talk about which type investors can use it then in single line its good for moderate investors who can’t take big risk but want good returns with a small high risk. In DSP fund we found good diversification of Large, Mid and Small Cap companies. This fund is in existence from almost 10 years. From beginning till now it has provided returns with almost 15% CAGR.

Conclusion :-

As a conclusion if we talk then SIP is one of the best method to save money and create wealth with that money in long term. But we should always remember that long-term here means more than 5 years. Also for your study we have shared three best funds because we personally invest our investors money for Low, Moderate and High risk investors and ourselves in the same funds.

Learn More :

Thank you for reading Buffett Money’s guide on the Advantages and Disadvantage of SIP. To keep learning and developing your knowledge of financial analysis, we highly recommend the additional resources below:

• Penny Stock
• High Growth Stocks
• Dividend Yield Stocks
• False Breakout Stocks
• Fundamentally strong stocks
• Importance of Paper Trading
• Importance of Trading Journal
• AI impact on Algo Trading
• Averaging Down Strategy
• Moving Average Strategy
• Bulk Deal Strategy
• Methods of Stock Market Prediction

Thank You

Happy Investing

This all is just for information purpose. Do your own study before investing or consult your financial advisor.

Thank you

Happy investing