Photo: Manish Yadav
Summary: SIPs aren’t a magic button, and the myths around them can kill your returns. This piece busts three popular myths. Read on to learn what really drives long-term outcomes and how to run a quick weekend SIP audit on your own portfolio.
The systematic investment plan (SIP) has become the default way for Indians to invest in mutual funds. Monthly deductions feel painless, you don’t have to time the market, and the popular belief is that SIPs are “the safest way” to invest in equity funds.
The numbers show how deeply this habit has taken root. Monthly SIP investments have risen from about Rs 3,122 crore in April 2016 to around Rs 29,529 crore in October 2025 — a jump of nearly tenfold in less than a decade.
But popularity is not the same as understanding. On investor forums, we routinely see questions like:
- “My SIP is 18 months old and still in loss. Is SIP a scam?”
- “Markets are falling, I have paused all my SIPs. Good decision?”
- “I’m doing SIPs in 8–10 funds. That should automatically give me good returns, right?”
What hurts most investors is not the SIP itself but the myths surrounding SIPs. These myths lead to unrealistic expectations, panicked decisions and poor fund choices — all of which sabotage long-term wealth.
Let’s break down the three big SIP myths that genuinely damage returns — and what to do instead.
Myth 1: “SIP guarantees good returns in a year or two”
This is the most common misunderstanding we see: “If I invest every month through an SIP, I should see good returns in 12–24 months.”
But an SIP does not change how markets behave. It only changes how you enter the market. The underlying fund is still an equity fund with its own volatility. If your SIP begins just before a correction, the first year may show flat or negative returns. That’s not a failure. It’s simply the timing of when you started.
Equity wealth-building is a 7–10 year journey. One year of SIP returns tells you nothing.
Why this myth destroys wealth
1. Impatience leads to premature exits: Investors look at their SIP after 12–18 months, see red and stop exactly when the process is beginning to accumulate low-cost units.
2. You judge the SIP, not your time horizon: An SIP cannot compress a decade of compounding into two years.
3. You keep chasing the next “hot” SIP: Stopping one SIP to start another based on recent performance ensures you never allow a full market cycle to play out.
How to think about SIP time frames
- Under five years → Noisy, unpredictable
- 5–7 years → Early signs of whether the portfolio is sensible
- 10+ years → Where rupee-cost averaging and compounding fully express themselves
If your goal isn’t at least 7–10 years away, the problem is your expectation, not your SIP.
Myth 2: “Stopping SIPs during a market fall protects my money”
This sounds logical: “Why buy when everything is falling? Let me pause my SIP.”
Unfortunately, this is one of the costliest habits an investor can develop.
Our analyses over decades show that investors who continued through every crash consistently outperformed those who paused during volatility.
Why this myth destroys wealth
1. You break rupee-cost averaging at the worst time: A fall is when SIPs buy the cheapest units. Pausing means skipping the best opportunities.
2. You convert a temporary fall into permanent damage: If you stop buying at low prices, you also miss the strongest recoveries.
3. You train yourself to react emotionally: Pausing SIPs based on fear turns your financial plan into a series of reactions to headlines.
How to think about pausing SIPs
Write down clear rules before you start.
Valid reasons to stop a SIP:
- Goal is near
- Major personal financial disruption (job loss, medical emergency)
- Planned shift from equity to debt as the goal approaches
Invalid reasons:
- “Sensex fell 10 per cent”
- “Mid caps are down 15 per cent”
- “Markets look scary”
If fear is the only trigger, that’s exactly when the SIP must continue.
Myth 3: “Any SIP is a good SIP — the method matters more than the fund”
Because SIPs are seen as “disciplined investing,” many assume: “As long as I’m doing SIPs, I’ll be fine.”
But SIP is just a method. It cannot repair:
- bad fund selection
- mismatched risk
- lack of asset allocation
- excessive concentration
- or blind trend-chasing
Many SIP disappointments come from using SIPs in narrow themes, chasing the latest outperformer or using equity SIPs for short-term goals.
Why this myth destroys wealth
1. You confuse process with product: A SIP into the wrong fund is still the wrong investment.
2. You end up with a cluttered portfolio: 8-10 similar funds bought randomly do not create diversification.
3. You ignore asset allocation: For short-term goals, an equity SIP is inappropriate risk, no matter how “disciplined” it feels.
A simple 3-step SIP filter
1. Goal and horizon: Is the goal 7–10 years away? If not, rethink equity.
2. Asset allocation: How much of your monthly surplus is going into equity SIPs? Can you tolerate a 30–40 per cent fall?
3. Fund quality and simplicity: Are you using a small set of diversified funds with clear roles? If you cannot explain why a fund is in your portfolio, it probably shouldn’t be.
When it does make sense to rethink your SIP
“Never stop SIPs” is not a law. You should reconsider or modify SIPs when:
- Your goal is approaching (shift to debt for safety)
- Your risk profile has changed due to life events
- The fund suffers persistent, cycle-long underperformance
- There is a clear, structural change in strategy or fund management
These are strategic reasons, not emotional reactions.
A simple weekend SIP audit
If you already run SIPs, here’s a quick exercise:
1. List all SIPs: Fund name, category, amount, start date, goal, etc.
2. Tag each SIP to a goal and horizon: If no goal exists, assign one or question the SIP itself.
3. Ask yourself three questions:
- “If markets fall 30 per cent, will I continue this SIP?”
- “Does this fund add something genuinely different?”
- “If returns are flat for two years, am I still comfortable?”
If the answers are “no,” one of the myths is already guiding your behaviour.
Now that we’ve busted these SIP myths, the next step is knowing where to begin or whether your current SIPs are on the right track. Not all funds suit every goal or risk appetite, and the method alone cannot fix a mismatched portfolio. That’s where Value Research Fund Advisor can help.
It offers expert-curated fund recommendations based on your goals, time horizon and risk tolerance so that your SIPs are not just disciplined, but also well-directed. Whether you're just starting out or doing a weekend SIP audit, Fund Advisor can guide you in building a solid, long-term portfolio.
Disclaimer
This article is for information and education only. It is not a recommendation to buy, sell or hold any specific mutual fund, stock or financial product, nor is it personalised investment advice. Investors should consider their individual financial situation and risk tolerance and, if needed, consult a qualified adviser before making investment decisions.
This article was originally published on November 26, 2025.
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