SIP is a form of investing in mutual funds in which an investor selects a mutual fund scheme and invests a specified amount at predetermined intervals
Investors perpetually seek better and more advantageous investment opportunities. Though there are many options available in the market, some of the popular ones include mutual funds (includes more than 81 lakh new investor accounts added by December end FY21) and systematic investment plans (SIPs – recorded over Rs 9,120 crores monthly SIP net inflows in March 2021 as per RBI data).
Also Read– IRDAI Calls For Strategies To Lower Insurance Premiums, Aims For Universal Coverage By 2047
SIP is a form of investing in mutual funds in which an investor selects a mutual fund scheme and invests a specified amount at predetermined intervals. Equity Funds are one of the types of mutual fund schemes. An equity fund is a mutual fund scheme that primarily invests in company shares/stocks. They are also referred to as Growth Funds.
Trying to adjust your SIPs precisely with market highs and lows is highly risky. Even for seasoned professionals, it is quite difficult to accurately predict fluctuations in the market. The rewards on your investments might significantly decrease if you miss out on a few upswings. Moreover, SIPs are intended for long-term wealth building.
Precisely timing your investments becomes less important since market movements tend to average out over longer periods of time. Furthermore, SIP investments or fresh registrations can be suspended or cancelled altogether. For instance, due to valuation concerns, HDFC Mutual Fund announced that as of July 22, 2024, it would neither take lump sum contributions into its HDFC Defence Fund nor create new SIPs. Soon after the plan’s June 2023 introduction, the fund house already placed restrictions on lump sum payouts.
Also Read– Domestic Banks, NBFCs now hold 36% exposure of Adani Group’s total debt
Here are the possible reasons why this can happen —
High-risk Market Scenario:
The market may have overvalued a firm, as is the case with every bubble if stock prices climb rapidly. This is especially true when expectations are high because of unachievable targets or accomplishments which might result in a drop in your earnings.
Nest Egg:
When markets become overheated for equity, fund managers are left with fewer opportunities to invest. These funds could potentially stop taking fresh investments for a short period of time in order to avoid sitting on massive amounts of cash during this time and treat the current investors fairly.
Read More:- No More Toll-free Journeys For Long Queues At Toll Plazas, Says NHAI: Details Inside
Policy Interventions:
From time to time, regulators such as the Association of Mutual Funds in India (AMFI) and the Securities & Exchange Board of India require them to comply with certain regulations. SEBI has directed fund companies to stop accepting new investors in funds that invest abroad such as foreign exchange-traded-funds (ETFs), concerned by the $1 billion limit being near full on these inflows recently.
For more news like this visit Officenewz.com.
