Systematic Investment Plans (SIPs) are one of the easiest and most popular ways to invest in mutual funds. They allow investors to invest small amounts regularly, which over time can grow into a large sum. But to get the best results from your SIPs, you need to avoid a few common mistakes. Experts say that even a good plan like SIP can fail if not handled properly.
Let’s look at the five most common mistakes people make when investing through SIPs and how to avoid them.
Many people panic when the market falls and stop their SIPs, thinking they will lose money. But this is the opposite of what one should do. According to Mayank Bhatnagar, Co-Founder and COO of FinEdge, SIPs work well in falling or unstable markets because of a concept called rupee cost averaging. This means you buy more units when prices are low, which helps bring down your average cost in the long term.
So, instead of stopping your SIPs during tough times, keep investing. The market will rise again, and your smart move of staying invested during bad phases will help you earn more later.
Another mistake is expecting fast returns from SIPs. Many investors get impatient and hope to see big profits in a short time. But SIPs work best over a long period, using the power of compounding. Compounding means your returns start earning more returns. It may feel slow in the beginning, but after a few years, the results can be amazing.
Bhatnagar adds that staying invested without getting greedy or fearful is key to building long-term wealth. If you keep withdrawing money or stopping your SIPs based on emotions, you will miss out on the benefits of long-term growth.
Another major mistake is starting SIPs without any clear reason. Some people start investing just because someone told them to or they read about it online. But if you don’t know why you’re investing, you’re more likely to stop midway or switch between funds unnecessarily.
Think of it this way: If you’re planning to go on a vacation, you decide your destination, budget, and how you’ll get there. The same logic applies to SIPs. Before starting, decide why you want to invest — for your retirement, your child’s education, buying a house, or any other goal. Once your purpose is clear, your investment decisions become more focused.
The next mistake people make is not increasing their SIP amount with time. Let’s say you start investing ₹40,000 per month to reach a retirement goal of ₹5 crore in 15 years. But over time, you don’t raise your SIP amount as your income grows. If you don’t step up your SIPs, you might end up reaching only half your target amount.
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Bhatnagar gives a clear example: If an investor needs to invest ₹1 lakh per month to reach a ₹5 crore goal, starting with ₹40,000 and never increasing it will result in falling short by more than 50%. So, it’s important to review your SIPs regularly and increase the amount each year to match your income and inflation.
SIPs are a great tool to build wealth slowly and steadily, but only if used the right way. Don’t stop your SIPs when the market drops — this is when they can benefit you the most. Be patient and let compounding work in your favour. Have a clear reason before starting your SIPs, and don’t forget to increase your investments over time. Also, remember that SIPs won’t always beat the market — they’re designed to reduce risk, not remove it.
With proper planning, discipline, and regular updates to your investment amount, SIPs can help you reach your financial goals easily. Avoid these five mistakes and let your money grow wisely.
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