Thinking of Investing in SIP? Here’s how Long Should you Invest in them

Investing can be a daunting task and if to have good returns in your investment, it is very important to know deeply and thoroughly regarding your investments and the time period, you invest in. One of the question, which vexes almost every mutual fund investor after buying the SIPs (Systematic Investment plan), is how long the SIP should be run. But for all those who does not know what SIP is, let us have a quick glance to what SIP is?

What is meant by SIP?

As meant, Systematic Investment Plan is a regular investment made in mutual funds, which is often confused as the Recurring Deposit in banks. But the major difference in SIP and RD is that the money invested in SIP is done in Mutual funds and not in bank accounts, which faces the market fluctuations as well. Usually investors go for monthly SIP deducting from the monthly income.

Equity Funds in longer Run vs. Shorter Run

It might happen that sometimes the investor is boon with large amount of money due to profits in sale of land, retirement bonus or any other kind of incentives from Job. He can either keep money idle in bank account or invest to enjoy the returns for lifetime. The best option comes to invest in Mutual funds backed by equity over longer period of time (5-7 years). But these equity funds can be very risky in shorter run. Investing a big chunk at one go can prove to be even more dangerous.  Also if the position of the market changes there are higher chances of incurring losses, more than 20% of the investment done.

SIP – The Antidote

To save you from the risks of investment done in markets, SIPs comes as a saviour. As investment is done on monthly basis for a time period, you might not face any loss all of a sudden due to market fluctuations. In fact, when market shows bearish trends, SIP investors can purchase more thus gaining more returns. This is the best gain an SIP Investor can get. But as stated the SIP investor is generally faced by the challenge of what “Time period” they need to invest their money in? Is 6 months, 1 year or even more time is considered to be best? The website  has detailed information regarding investment in SIPs, do give it a read if you plan on investing in SIPs.

Time period to invest in SIP

Usually SIP done for 4 or more years is counted to be on safer and profitable side than done for a short period of time. It has been seen that investing in SIP over period of 4 years, hardly bears any losses or are minimum. But it is really interesting that there is higher risk and higher gain in short period in SIP. This means the gain percentage would also be more and the risk would also be high in shorter period.

But this cannot hold good for several investments. Like the yearly bonus for a salaried person would not be gain worthy if, he invests the money in term period of 4 years. It would be good if he invests the same money in 6 months time period to avail maximum profits. It is like investing based upon how important the money holds to you at present. If it is fruitful, in near future invest in shorter period and if it is fruitful in loner run then invest for longer time period.