Topic 6 of 9~5 min read

SIP Myths vs Facts

Definition

Despite SIP being one of the most popular investment methods in India, several misconceptions persist among investors. Understanding the difference between SIP myths and facts is essential for making informed investment decisions and avoiding common pitfalls.

In Simple Words

Many investors either avoid SIP due to myths or invest with unrealistic expectations. Some believe SIP guarantees returns (it does not). Others think SIP should be stopped during market crashes (the opposite is true). Some believe large SIPs are always better (consistency matters more). Let us bust the top myths with factual evidence.

Real-Life Scenario

Suresh heard from a colleague that "SIP always makes money" and started investing ₹15,000/month in a sectoral fund (IT sector) in 2021. When the IT sector corrected 30% in 2022, Suresh panicked and stopped his SIP, booking a loss. His colleague Deepa, investing the same amount in a diversified fund, continued her SIP through the correction. By 2024, Deepa's average cost was much lower and she was in significant profit, while Suresh locked in his losses.

Key Points to Remember

Myth: SIP guarantees returns. Fact: SIP is a method, returns depend on the fund and market.

Myth: Stop SIP when markets crash. Fact: Market crashes are the best time for SIP — you get more units.

Myth: SIP is only for small investors. Fact: Even HNIs use SIP for disciplined investing.

Myth: Longer SIP always means better returns. Fact: Fund selection and asset allocation matter too.

Myth: SIP date matters a lot. Fact: Over long periods, the date of SIP has negligible impact.

Myth: You need to monitor SIP daily. Fact: Review quarterly or semi-annually — daily monitoring leads to panic decisions.

Myth: SIP in the best-performing fund is ideal. Fact: Past performance does not guarantee future results.

Myth: One SIP is enough. Fact: Diversify across fund categories for optimal risk-adjusted returns.

Frequently Asked Questions

Test Your Knowledge

1 questions to check your understanding

Question 1 of 1Score: 0/0

What should you do when the market crashes during your SIP?

Summary Notes

SIP is not a guarantee — it is a disciplined investment method

Never stop SIP in panic during market corrections

Diversify across fund types instead of chasing past performance

Review but do not obsess — quarterly reviews are sufficient

Consistency and patience are the real secrets of SIP success