Why SIP in Liquid, Debt or Arbitrage Funds Doesn't Make Sense
Why SIP in Liquid, Debt, or Arbitrage Funds Doesn't Make Sense SIP (Systematic Investment Plan) is a powerful tool for wealth creation, especially in volatile asset classes like equity. However, using SIP in funds like Liquid Funds , Debt Funds , or Arbitrage Funds defeats its core purpose. Let’s explore why: 1. SIP Works Best in Volatile Asset Classes The primary benefit of SIP lies in rupee cost averaging : SIP helps you buy more units when markets are down and fewer units when markets are high, reducing the average cost over time. This benefit is only significant in volatile funds like equity or hybrid funds. Liquid, Debt, and Arbitrage Funds are inherently stable and exhibit minimal fluctuations. As a result, SIP doesn’t significantly impact your returns. Example: If you invest ₹10,000 via SIP in a liquid fund every month, the NAV hardly fluctuates. You end up buying similar units every month, negating the advantage of cost averaging. 2. Lump Sum is Ideal for Stab...
