Market experts point to a pattern of behavioural and planning errors, from stopping SIPs during corrections to misjudging risk and overlooking tax implications, that can dilute long-term returns.
Halting SIPs during corrections
A frequent mistake is discontinuing SIPs when markets decline.
Mohit Basant Bagdi, Founding Member and Head of Investment Research at MIRA Money, said investors often react to fear instead of sticking to their original allocation strategy.
Unless the fund selection itself was flawed, stopping SIPs during downturns works against the principle of rupee-cost averaging, he noted.
In falling markets, continued investments accumulate more units at lower prices, potentially improving long-term outcomes. Historical trends show that investors who maintained SIPs through volatility fared better than those who attempted to time entries and exits, Bagdi said.
Harshal Dasani, Business Head at INVasset PMS, added that many investors misinterpret prolonged sideways movement as structural weakness. A time correction, he said, does not necessarily signal deteriorating fundamentals and may instead offer opportunities to accumulate quality exposure at relatively reasonable valuations.
Failing to increase contributions
Another common oversight is keeping SIP amounts unchanged for years despite rising incomes.
Bagdi said investors often settle on a fixed monthly contribution and do not step it up in line with improved savings capacity. He also observed that many investors prefer to increase allocations only when market sentiment is positive, rather than during uncertain phases when valuations may be more favourable.
Misjudging risk and goal alignment
Experts caution against assuming that SIPs are inherently low-risk.
SIP is a method of investing and does not alter the risk profile of the underlying asset class. Problems arise when investors use equity SIPs for short-term goals under the assumption that staggered investing reduces volatility risk. Proper goal mapping, based on time horizon and risk tolerance, remains critical, Bagdi said.
Concentration in thematic funds
Rising retail participation in thematic and sectoral funds over recent years has also created concentration risks.
Bagdi noted that while thematic exposure can work as a tactical allocation, retail investors often begin SIPs in sectors after strong trailing returns. Such themes may then enter extended periods of muted performance, leading to premature exits and repeated shifts to new sectors.
Dasani said reallocating aggressively based on short-term headlines or chasing themes after visible breakouts are typical behavioural errors in consolidating markets.
Overlooking tax efficiency
Tax planning during redemption is another area investors frequently neglect.
In equity and equity-oriented funds, gains on units held for less than 12 months are taxed as short-term capital gains at 20%, while long-term capital gains are taxed at 12.5%, with an annual exemption of up to ₹1.25 lakh on gains.
Because each SIP instalment is treated as a separate investment with its own holding period, investors need to plan withdrawals carefully to optimise tax liability. Failure to do so can lead to avoidable tax outgo, Bagdi said.
Discipline over sentiment
Dasani said India’s broader macro and corporate fundamentals remain supportive despite phases of consolidation. In such an environment, he added, the larger risk for long-term investors is inconsistent participation rather than interim volatility.
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