Systematic investment plan or SIP has become one of the most popular and convenient ways for retail investors to part their money in the Indian stock market.
The monthly SIP trends underscore the investor’s commitment. The SIP contribution reached a record ₹29,361 crore in September 2025, marking an all-time high. The number of active SIP accounts rose to 9.25 crore, up from 8.98 crore in August, with the total SIP assets under management (AUM) accounting for 20.2% of the mutual fund industry’s total assets.
What is SIP?
SIPs are a way of investing in mutual funds in a periodic manner, generally over a month. It allows investors to invest a fixed amount every month in a mutual fund or stock of their choice, helping them benefit from rupee cost averaging and the power of compounding over time.
Investors can start SIP for as low as ₹500 and build wealth over time. SIPs allow investors to you buy more units when prices are low and fewer when prices are high, helping average out their cost over time.
It’s a simple and disciplined way of building wealth. Like most equity investments, SIPs work best over the long term.
Five mistakes to avoid while investing in SIPs
While SIPs are quite popular, it’s not like investors don’t lose money via them. At the end of the day, market risks are applicable to SIP investments too. However, investors tend to make certain mistakes unknowingly that prove to be costly for them over time.
Some of these mistakes are easily avoidable. Here’s a lowdown:
1. Stopping SIPs when markets fall
A popular adage in the stock market says, “Be greedy when others are fearful, and fearful when others are greedy.” Yet, many investors do the opposite — they stop their SIPs or exit mutual fund investments when markets are in a downturn. This reaction, though common, can turn into a costly mistake.
Halting SIPs during a market downturn is like skipping a sale when prices drop. SIPs are built to take advantage of rupee-cost averaging, meaning investors automatically buy more units when markets are cheap and fewer when prices rise. Over time, this strategy lowers the average cost per unit and enhances long-term returns.
2. Redeeming too early
Investors expecting to make a windfall on SIP investments in 3-5 years forget that these are the accumulation years, and returns follow later. If you redeem at this juncture, you will miss out on the compounding.
For instance, a simple analysis using the SIP calculator shows that if you invest ₹10,000 for a period of 5 years with an annual step-up of 10% at an expected 11% return rate, your maturity amount will be ₹9.45 lakh. Out of this, ₹7,20,000 is your investment and only 20% will be returns.
However, over a 15-year period, your corpus would be ₹69,00,000, with the estimated returns ( ₹38 lakh) making up for over half of it.
3. Switching funds for performance
Frequently switching funds in a bid to make returns is a strategy that will fail. This is because every switch will have hidden costs like taxes, exit loads and also lost compounding.
Switch your fund if it underperforms consistently, and not if another fund has offered massive gains for a particular period.
4. Ignoring expense ratios
Along with fund performance, it’s imperative to take a look at the expense ratio. A higher expense ratio will eat into your returns without you realising it.
For instance, a 1% difference in expense ratio might look small, but on a ₹10 lakh investment, it amounts to ₹10,000. Therefore, check all the costs involved before investing.
Passive funds have lower costs than actively managed funds.
5. Chasing top-performing funds
Don’t let the recency bias affect your investment decision. Just because a fund has delivered massive returns over the last 2-3 years, it doesn’t guarantee that the performance will sustain.
What investors need to look at is consistency. A consistently performing fund has the promise of compounding your money, while a high-flying fund might lose its glamour going forward.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
