SIP Investment – Success or failure – Depends on you

SIP Investment in Mutual fundsSIP Investment – Success or failure – Depends on you

Systematic investment in Mutual funds provides good returns in the long term. However some investors see failure in SIP investment and they crib saying SIP investment in mutual funds is not their cup of tea. What are those specific things that need to be kept in mind to gain more in Systematic Investment Plan investment in mutual funds ? In this article, I would provide some insights about how people fail in SIP investment and how these things to be taken care to gain more in getting higher returns.

What is Systematic Investment Plan in Mutual funds?

For the benefit of new readers in this blog, I would provide a some basics of SIP in mutual funds. Others can skip this section.

Systematic Investment Plan (SIP) refers to investment of smaller amounts month on month in mutual funds where they can yield higher returns in longer run. You can invest in a variety of SIP mutual fund schemes which consist of diversified mutual funds, large cap mutual funds and high risk mutual funds like Midcap/small-cap mutual funds or sector based mutual funds. There are hybrid mutual funds & debt mutual funds which are low risk. One can invest in all these schemes as low as Rs 500 per month. Means an investment in mutual funds through SIP can be started by any investor whether he is high risk investments or low risk investor.

Also read: Top 5 midcap/small cap mutual funds to invest for 2014

Why people fail in SIP investment in mutual funds?

1) Investing in large sum through SIP for short term: Mutual fund investments work well when you invest systematically every month over a long term. If you invest large sum through SIP for say 6 months, there are chances that markets might be at peak level and may get corrected in near term. Hence there are greater chances that your investment would get screwed. Hence do not consider taking SIP investment for short term of say 6 months. Always invest for at least 5 years through SIP mode and save your investment more than 8 to 10 years to get higher yields

2) Don’t invest in mutual funds without knowing its objectives: Last week there was a reader who commented on our blog saying that he  invested the majority of funds in the sector based funds and mid cap/large cap funds thinking that she is investing in good performing funds. Though the funds are good, they are high risk, high return funds. She is low risk appetite and by mistake she was investing in such funds. First you need to examine the objectives of the mutual fund scheme before investing in any such schemes.

3) Success key is to continue SIP investing: There was a reader few days back who was investing in best performing funds for some time. Yet for some reason he stopped investment through SIP for the past 1 year and he was investing in Bank Recurring deposit. Due to market reaching peak level now, if he would have continued to invest in SIP the last 1 year, he would have gained more than 25% of his entire portfolio. Always continue to invest in SIP investment on a long term basis so that you can encash such market peaks.

4) Don’t expect quick returns: There was comment from Anand who is one of the regular readers saying that HDFC Top-200 is not performing well in last 2 years. This was one of the best performing mutual fund in the last 10 years where it gained more than 20% annualized returns. Don’t expect quick returns, patience pays. Invest in top performing mutual funds through SIP investing and for the long term.

5) Do your analysis and don’t follow your friends: Many of us blindly follow what our friends are doing. Have you done a quick analysis or searched a website or blog about the best SIP investments in mutual funds? One of the reader at the age of 45 is working in MNC company and has 2 children. His comment was that he is following  his colleague/friend and investing in ICICI Exports and Services Mutual fund. This mutual fund invests in IT and Pharma sector and other sectors which is just like sector based fund which is high risk. His friend is at 25 age and willing to take risks. However this gentleman is not willing to take any risk and he wants to go with low risk. How you can follow your friend where there is a difference in risk appetite? Don’t blindly follow your friends or colleagues, do your analysis and check whether such fund suits you before investing.

6) SIP strategy – Invest more when the market is down and invest less when the market is up: This is a good mantra. When markets are going down, increase your SIP. When markets are going up without any reason, you should reduce your fresh investments. This way you would be able to balance your investment.

Also read: Top MIP Mutual funds to invest for 2014

7) SIP investment in not for short term: One of the reader commented saying that he wants to invest in SIP in mutual funds for 1 yr. While you can invest in liquid funds or ultra short term mutual funds, these should be used more for lump sum investment parking for short periods. It may not work well if you want to invest in SIP for 1 year. Mutual funds through SIP is not suited for short term game.

Conclusion: I am not saying the above is a comprehensive checklist to grow your money through SIP investment, but these could be considered as a basis while investing in mutual funds through SIP.

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SIP Investment – Success or failure – Depends on you

Suresh KP


  1. Thanks for your good work,

    I am planing to do SIP each Rs 3000 for the below funds, what is your view please?

    Icici pru value discovery
    Franklin india high growth fund
    Sundaram Mid cap fund
    DSP BR Micro cap fund

    take care

  2. Hi,
    i am keep reading your blog and its very useful for new investor like me…. i want to invest around 4-5 K per month…
    here my question is,
    1) this is the correct time or should i wait for more time as market is getting down ??
    2) should i go with four different MF with 1k/per month or 2 MF 2k/mer month ??

    thanks in advance.


  3. I am 25 year old ans an amateur in investment. Please suggest me SIP plans so that I can have a good sum of money when I will be 30.

  4. Hi Suresh,

    My father invested about 15 years on one of the ULIPS plan as per his friend’s says, however he got even the lesser amount than he invested, Just wanted to know whether SIP investment are like ULIPS, or at more risk or lower risk, because I am willing to invest in SIP plans.

    Deepak Bisht

    1. Deepak, MF’s too carry risks. However if you can invest in top funds and do SIP, you can always get 10% to 15% annualised returns. These are not comparable with ULIP’s where insurance agents cheated investors and sold such policies.

      1. Hi Suresh,

        Thank you so much, can you tell me where I can buy SIP as I am totally newbie in mutual funds, I am willing to invest Rs 1000-2000. Also It will be appreciable if you can tell a bit about high risk and lower risk? And how badly it can affect on your investment.

        Also suggest me some good SIP to invest.

        Deepak Bisht

  5. Hi Suresh,

    I want to invest 5k pm.I am new in sip.please suggest me good funds with moderate risk level.I want to invest for long term 5-10 years.


    1. Invest in these funds. 1) Large cap – HDFC Top-200 / ICICI Pru focussed blue chip fund 2) Balanced – You can check HDFC Prudence / ICICI Balanced fund. 

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