Disadvantages of SIPs | Fusion - WeRIndia

Disadvantages of SIPs

Disadvantages of SIPs

Systematic Investment Plans (SIPs) are a highly hyped these days. They are being marketed in such a way that many people believe they can make money constantly. However, even SIPS have their disadvantages or demerits.

There are many cases where the people who invested SIPs haven’t always made money. It doesn’t mean that people would always lose money either.

For example, if you have been investing money in SIPs for the last two years, you would notice that in all of last year, you bought into markets at average index levels close to 27500 points. This means that you are now buying at lower levels to average that cost because the Sensex is now at 24,900 points. In order to make to get a zero sum, the Sensex should be back at 27,500 points by the end of this year. This means that, by the time that happens you realize after 2 years, you could be where you are. However, the problem is that Sensex should be around 32,500 points in order to make up for the interest cost you would have got in recurring deposits these two years.

People who invest when the market is at low like now could score well. However, there is less chance for those who invested in 2015 when the Sensex reached a peak to get much profit.

All in all, SIPs are something that needs patience just like with shares. It all depends on the timing. Those who cashed their holdings in the start of 2015 would have gotten a good profit thanks to the peak stages of the market. Timing the market in a perfect way is not really possible. At present, the market is at 24,900 points making it a good time to invest. The market has high chances of increasing in two years which would reap profits.

Image Reference: Goodreturns

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