{"id":303211,"date":"2025-11-24T06:20:11","date_gmt":"2025-11-24T06:20:11","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/303211\/"},"modified":"2025-11-24T06:20:11","modified_gmt":"2025-11-24T06:20:11","slug":"are-you-overrelying-on-sips-for-achieving-lifegoals-sip-alone-may-not-ensure-your-financial-goals-are-met","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/303211\/","title":{"rendered":"Are you overrelying on SIPs for achieving lifegoals? SIP alone may not ensure your financial goals are met"},"content":{"rendered":"

Even as the broader market is yet to regain its year-ago value, the systematic investment plan (SIP) train marches on. Monthly SIP inflows are about to touch the historic Rs.30,000 crore mark, up from Rs.25,323 crore worth of inflows in October 2024, as per latest data from the Association of Mutual Funds in India (AMFI), the mutual fund industry\u2019s trade body. SIP assets now account for nearly 20% of the industry\u2019s total assets.
Indian retail investors have made it an unshakeable habit\u2014as customary as the monthly trip to the neighbourhood shopping mall. The continued faith in this investing tool is evident in the persistent inflows.<\/p>\n

Most of the credit goes to the messaging from the Indian mutual fund industry, distributors, and financial advisers on the merits of consistent investing. While that has inculcated discipline in investing, it has also led many investors\u2014especially firsttimers and those who haven\u2019t seen a bear market\u2014to believe that you can never lose money when investing through SIPs. Some investors have come to believe it is a magic pill that helps avoid hangover from market excesses and assures healthy outcomes.<\/p>\n

Nehal Mota, Co-Founder & CEO, Finnovate, says, \u201cFor many, SIPs are the default way to invest in equity markets. But with this rise, a few misconceptions have also grown silently. Some investors now believe SIPs are safer, or they guarantee long-term success. The truth is more nuanced.\u201d Are SIPs making investors a tad too complacent?<\/p>\n

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Behaviour is keyThe perceived safety in SIP is relative to the risk associated with lump-sum investments. This is the risk that a chunk of your money will be deployed at or near market peaks. \u201cThe most slippery element of timing the market is largely taken care of through an SIP. While a lump-sum investment always carries the risk of buying near the market peak, an SIP schedule cuts through intermittent peaks and troughs, which effectively averages the cost of acquisition of investment units,\u201d outlines Nirav Karkera, Head of Research, Fisdom.<\/p>\n

This is the entire premise of taking the SIP route: automated commitments mean investors don\u2019t have to grapple with their worst emotional impulses during volatile periods. This behavioural stability often matters more than the mathematical outcome, argues Mota, citing the pandemic-hit year 2020, which saw one of the sharpest and fastest market crashes in recent history. It offers a fair comparison of lump sum versus SIP behaviour under stress.<\/p>\n

Consider this: investor A invests Rs.6 lakh as a lump sum on 1 January 2020, when the NIFTY 50 index fund\u2019s net asset value (NAV) is Rs.118.1. Investor B invests the same amount through a monthly SIP of Rs.50,000 from January to December 2020, buying units in a highly volatRs.6 lakh fall to nearly Rs.4 lakh within weeks, a psychological jolt that, for many, triggers fear, regret, or the temptation to exit. The SIP investor, however, experienced the same fall very differently: April became the most valuable month in terms of units accumulated because the SIP bought more at the year\u2019s lowest NAV.<\/p>\n

By the end of the calendar year, both investors had invested the same total amount: Rs.6 lakh. But when we measure the value on 1 January 2021, with the NAV back up to Rs.136.26, their outcomes are no longer identical. Investor A\u2019s lump sum grows to about Rs.6.92 lakh, reflecting the market\u2019s recovery but still anchored to the January 2020 entry price. Investor B\u2019s SIP, on the other hand, benefits from buying across the entire range of 2020\u2019s volatility\u2014including the deepest lows during the panic months\u2014and ends the year at roughly Rs.7.7 lakh. The gap is not due to better timing, but a lower average purchase cost. By steadily investing through the downturn, the SIP turned the crash into an advantage rather than a setback.<\/p>\n

\u201cThis is the behavioural edge of SIPs: they convert volatility into an ally rather than a threat. The SIP investor\u2019s experience is smoother, the regret is lower, and the probability of staying invested is much higher,\u201d Mota remarks.<\/p>\n

But this relative safety of SIP is tied to your own behavioural tendencies. This argument falls apart if you succumb to the same impulses. Rajani Tandale, Senior Vice President\u2014Mutual Fund, 1 Finance, says, \u201cSIPs are considered safer only when investors follow the right discipline. For those who enter SIPs when markets are high and stop or redeem when markets correct, SIPs can become counterproductive.\u201d<\/p>\n

A 2022 Axis Mutual Fund study found a significant gap between investor returns and fund returns, even when investing via SIP. For SIPs in equity funds run between 2009 and 2022, investors earned 3.9% less than the corresponding fund return. Further, a study by the Securities and Exchange Board of India on redemptions\/switches found that only about 3% of investors hold mutual fund units for more than five years. \u201cThis clearly reflects a misalignment between investor behaviour and the true purpose of SIP investing. For investors who fail to grasp this, SIPs may not turn out to be the \u2018safer\u2019 option they expect,\u201d Tandale asserts.<\/p>\n

Evidence shows that SIP investors are usually rewarded for persistence over longer time frames. A March 2025 joint study by ET Wealth-CRISIL on SIPs across various seven equity fund categories that have run for the past 15 years shows that the chances of a positive return heavily improve after crossing the seven-year threshold. Further, the study found that it takes at least five years for SIPs to stand a 80% chance or better to earn return exceeding 10%.<\/p>\n

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Beyond emotionsEven if you manage to curb your impulses and invest through SIPs in a disciplined manner, there is no guarantee it will help you deliver a healthy outcome.<\/p>\n

An SIP remains vulnerable to sequence-of-returns risk. In particular, the final phase of an SIP is crucial to the overall return experience, regardless of the rupee-averaging mechanism. It doesn\u2019t matter how long the SIP has run: whether you started at the market bottom, at the market peak, or somewhere in between. A sharp market correction in the run-in towards your goal maturity may hurt you badly.<\/p>\n

If a Rs.10,000 monthly SIP had been started at the market peak in January 2008, an investment of Rs.14.5 lakh would have risen to a corpus of Rs.28.1 lakh by January 2020, yielding a healthy 10.5% return. But by 23 March 2020, the same SIP would have shrunk in value to Rs.17.6 lakh, a paltry 3% return. A 12-year SIP was cut down to size within a few weeks. The outcome would have been similar if the SIP had been started at the previous market bottom. This shows how vulnerable even a longrunning SIP can be to market gyrations. An unexpected turn of events in the final leg of your SIP journey could throw a spanner in the works.<\/p>\n

While SIPs may reduce average purchase price volatility, they introduce path-dependent risks, points out Rajan Raju, Director, Invespar Pte Ltd, in his September 2025 study \u2018Are SIPs really sahi\u2019. \u201cSIP investments are path-dependent, exposing them to sequence-of-return risk where unfavourable return patterns significantly impact outcomes, a factor rarely acknowledged in marketing narratives,\u201d the study observes.<\/p>\n

Mota adds, \u201cMany people today look at SIPs as a safer avenue simply because money goes in every month instead of all at once. This makes investors feel psychologically protected. But the safety is only in behaviour\u2014it does not make the investment itself safer.\u201d In some instances, the SIP may even fall short in risk outcomes relative to lump-sum investments.<\/p>\n

Long-running SIPs not immune to volatility
The investors who diversify through SIPs remain vulnerable to market swings.<\/p>\n

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End phase crucial to SIP outcome
Starting an SIP at market top or bottom does not change outcome as much as circumstances at exit.<\/p>\n

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SIP losses averted after 7-8 years
Over shorter time frames, the chances of incurring losses are high, while the probability of healthy returns improves after five years.<\/p>\n

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Return-persistence trade-offPurely mathematically speaking, SIP investments are no match for lumpsum investments. If you have the money up front and can deploy right away, your entire capital is put to work for longer, allowing maximising of compounding. The study by Raju finds that gradual accumulation (linked to income) retains only 56-87% of terminal wealth under lump-sum investing. This implies the SIP investor may give up nearly 13-44% of potential wealth.<\/p>\n

Raju observes that SIPs can lead to much lower final wealth than investors expect, and the supposed safety advantages only hold for some types of SIPs over long investment periods. This shows that the messaging around SIPs doesn\u2019t always match how they actually perform mathematically.<\/p>\n

Yet, for many investors, accumulating wealth via SIP remains the only feasible option. This path may also prove superior for those who find market participation easier when their own behaviour is removed from the equation. This behavioural nudge is evident in the AMFI data, which shows that 23% of advised SIPs remain active beyond five years, compared with 12.4% for self-directed plans. \u201cThis near-doubling of persistence rates suggests substantial practical value from commitment mechanisms that theoretical models cannot capture,\u201d Raju surmises. For the expanding base of Indian retail investors, particularly those in B30 (beyond the top 30) cities with limited investment experience, SIPs can indeed be \u201csahi\u201d as superior alternatives to sporadic savings or failed market-timing attempts, he adds.<\/p>\n

\u201cThe real benefit of SIP is not protection from losses, but protection from bad timing and impulsive behaviour – two of the biggest reasons investors lose money,\u201d Mota concludes. \u201cOften the discipline that autodebits bring in adds a soft positive nudge to portfolios. SIPs are not a silver bullet, but a smart way to navigate volatility and maintain discipline,\u201d adds Karkera.<\/p>\n

Further, SIPs and lump-sum investments appeal to different investors. While lumpsum investments appeal to those who can invest their entire corpus upfront, SIPs suit those who have a regular income and wish to save a portion of that, every month.<\/p>\n

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However, experts insist that disciplined SIPs alone may not assure financial goals are met. Mota insists, \u201cLong-term wealth is rarely built by choosing one path over the other. It is built by staying invested long enough for compounding to work, and by using a combination of SIPs for discipline and lump sums for opportunistic allocation. Over time, this blend tends to deliver a smoother journey and a stronger outcome than relying on any single method.\u201d If you are counting on your SIPs to deliver desired outcomes, set right expectations and put rhetoric aside.<\/p>\n","protected":false},"excerpt":{"rendered":"Even as the broader market is yet to regain its year-ago value, the systematic investment plan (SIP) train…\n","protected":false},"author":2,"featured_media":303212,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[136086,45,49,48,133,136090,136088,131,132,136092,136091,136089,136084,136087,131714,136085],"class_list":{"0":"post-303211","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-are-sips-safe-investments","9":"tag-business","10":"tag-ca","11":"tag-canada","12":"tag-finance","13":"tag-long-term-sip-returns-india","14":"tag-mutual-fund-sip-disadvantages","15":"tag-personal-finance","16":"tag-personalfinance","17":"tag-rupee-cost-averaging-sip","18":"tag-sip-behavioural-investing","19":"tag-sip-investment-mistakes-to-avoid","20":"tag-sip-investment-risks-india","21":"tag-sip-sequence-of-returns-risk","22":"tag-sip-vs-lump-sum-returns","23":"tag-systematic-investment-plan-safety"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/303211","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=303211"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/303211\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/303212"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=303211"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=303211"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=303211"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}