Mutual fund SIP (systematic investment plan) is probably the easiest and most popular option for millions of people looking to build wealth over the long term. The ability to achieve a bigger financial goal with a disciplined small monthly investment has attracted people to SIP investing. However, many myths about SIPs still persist among investors despite a significant surge in the number of SIP investors over the years. These myths not only lead to wrong decisions but also impact long-term returns. Let’s discuss some major myths about SIPs and their truths.
Myth 1: SIPs always deliver excellent returns
Many investors, especially newcomers, assume that once they start a SIP, they’ll get good returns right from the beginning. They believe that SIPs deliver stable, high returns year after year. This belief has grown stronger in recent times because of social media posts and finfluencers making misleading claims, such as saying that SIPs can make you a millionaire within no time.
But this belief is far from reality.
Truth:
SIPs require time and discipline. Moreover, their performance depends on many other external factors.
Keep in mind: If the fund’s strategy is weak, its track record is unstable, or it consistently underperforms, then even SIPs won’t yield satisfactory returns. SIPs simply ensure that you invest at different market levels, spreading the risk slightly and reducing volatility.
Three factors influence SIP results:
The right tenure: Expecting high returns from a SIP in a short period of time isn’t realistic. Longer tenures—7, 10, or 15 years—are what create real value.
The right timing: Regular investments don’t necessarily mean that even a bad fund will become good. Starting an SIP at the right time in the right fund is beneficial.
The right category: Not every investor is suitable for every fund category. Choosing the right category based on your risk profile is crucial.
Myth 2: You should start a SIP in every popular fund
A common tendency among new investors is to immediately start a SIP in a fund that is trending on social media, that people are talking about, or that is ranked highly on a rating website.
People often think, the more funds they have, the greater their returns will be. This is why many portfolios are filled with 8–10 funds, half of which the investor doesn’t even understand.
This approach is not only wrong but can also harm your returns.
Truth:
SIPs only yield real benefits when your overall investment strategy — your portfolio — is tailored to your needs, risk tolerance, and financial goals. Starting an SIP in every popular fund neither increases returns nor reduces your risk. On the contrary, it makes your portfolio unnecessarily bulky and complex.
For example:
If you invest in 3-4 mid-cap funds in the same category, you’re actually overlapping similar stocks. This leads to duplication, not diversification.
The right approach is to choose fund categories based on your goals—such as your child’s education, buying a home, or retirement—and to include the required number of good funds in your portfolio accordingly.
A balanced combination of 3-5 funds is often effective, which may include options like large-cap, flexi-cap, mid-cap, or hybrid.
Myth 3: Once you start a SIP, you should never stop it.
Many investors have a deeply ingrained belief that once you start a SIP, continuing it for a long time without interruption is the right strategy. They also fear that stopping an SIP midway will reduce the investment’s returns or be considered a wrong decision.
This misconception is prevalent among many, especially among new investors, who believe that stopping an SIP is a financial mistake.
But real life isn’t so rigid. Changes in income, job changes, unexpected expenses, or the emergence of new financial goals — all these circumstances impact investment plans. Continuing a SIP isn’t always possible or practical.
Truth:
The truth is that you can pause, change, or stop a SIP at any time, depending on your needs, circumstances, and financial situation.
A SIP isn’t a contract — it’s a flexible investment strategy, one in which you have complete control.
Today, mutual fund companies also offer a SIP pause facility for investors’ convenience. This allows you to pause your SIP for a few months and then easily resume it when your circumstances improve.
This is especially helpful if, for some reason, it’s difficult to withdraw the monthly amount, but you don’t want to stop SIPs altogether.
Furthermore, if you notice a decline in a fund’s performance, or your investment strategy has changed, you can stop your SIP and start a new one in a more suitable fund.
Myth 4: Stopping a SIP when it doesn’t perform well or the market falls
Many investors believe that if their SIP isn’t delivering strong returns for a few months, or if the market suddenly drops, stopping the SIP is the safest option. During a downturn, the NAV falls, growth slows, and the portfolio shows a temporary loss. People panic and think it’s wise to stop the SIP.
This behavior is very common, but wrong.
Truth:
A market downturn may seem like a loss to your portfolio, but from a SIP perspective, it’s actually a win-win situation. This is when you get a larger quantity of units of a high-quality fund at a lower price. This is called cost averaging — bringing down the average purchase price.
For example:
If you’re investing Rs 5,000 per month and the NAV is Rs 100, you get 50 units.
But if the market falls and the NAV drops to 80, the same Rs 5,000 will earn you 62.5 units.
These additional units strengthen your returns in the long run.
The entire SIP strategy is based on the principle that markets don’t move consistently. It’s during fluctuations that SIPs truly work—buying more units reduces average costs, and later, when the market improves, these same units generate better returns.
If you stop your SIP every time it falls, you’ll lose out on the gains you could have made from those months when you could have purchased cheaper units.
So, the right approach is to let your SIP run for the long term and view the decline as a “buying opportunity,” not a “time to panic.”
If you’ve chosen the right fund, there’s often no need to stop your SIP—in fact, it’s only through consistent investment that real, sustainable, and strong returns are generated.
Myth 5: SIP is a product, you can do any SIP
Even today, many investors believe that SIP is an investment product in itself. They believe that just like a bank FD is a product, SIP is an independent investment option. Many even advise, “Do any SIP; it will only be beneficial in the long run.” This misconception leads people to start SIPs in any fund without researching it.
Truth:
SIP is not actually a product. It is simply an investment route through which you invest a fixed amount in a mutual fund every month or at regular intervals. This means that your money doesn’t go towards the SIP—it goes towards purchasing units of the fund you’ve chosen.
Therefore, the most important thing before starting a SIP is to choose the right fund. If the fund’s quality is poor, its portfolio is weak, or its performance has been consistently average, SIP alone will not yield good returns.
The full benefits of a SIP in the long run are only realised if the fund itself is strong. Before investing, you must check that the fund has a history of stable returns, an experienced fund manager, a clear and disciplined investment strategy and a risk profile appropriate for your needs.
This means that SIPs only work if the fund is right. Therefore, investors should first understand that SIPs are a convenience, not a product—and the real difference lies in the quality of the fund.
The gist of the story: Those who break free from myths win in SIPs.
Today, SIPs have become a strong and disciplined investment method for Indian investors. But you can only reap the benefits of SIPs if you stay clear of myths and plan your investment strategy wisely. Choosing the right fund, having a long time horizon, and being consistent — these three key factors play a crucial role in making SIPs a strong asset for you.