6 Common Mistakes Made by SIP Investors

  • 02 Aug 2023
  • Read 4 mins read

One of the best ways to systematically create wealth in the long run is through an equity SIP. A systematic investment plan (SIP), is a methodical way of investing in a mutual fund so that money works really hard on your behalf. However, to make your SIP successful and meaningful, it is essential that you avoid some common SIP mistakes. What are these common SIP mistakes and how to avoid them? 

1. Starting late on your SIP journey

You must have heard the piece of wisdom that it is never too late to start planning and saving. However, if you want to get the full benefits of SIP, it is best to start early. The table below gives 4 scenarios to explain why to start a SIP early.







SIP for 25 years



SIP for 20 years



SIP for 15 years



SIP for 10 years


SIP Invested in Equity FundsEquity FundsEquity FundsEquity Funds
Annualized CAGR14%14%14%14%
SIP Tenure 25 years20 years15 years10 years
Monthly SIP AmountRs.8,000Rs.12,000Rs.16,000Rs.20,000
Total InvestmentRs.24.00 lakhsRs.28.80 lakhsRs.28.80 lakhsRs.24.00 lakhs
Final SIP ValueRs.2.18 croreRs.1.58 croreRs.98.06 lakhsRs.52.42 lakhs
Wealth Ratio9.08 times5.49 times3.41 times2.18 times

The sooner you start the more your capital generates and your returns generate more returns. That is evident from the wealth ratio of the 25 year SIP.


2. Choosing debt over equity funds for SIP

Technically, the SIP can be on equity funds, debt funds or liquid funds. But, if your intent is to create wealth in the long run, equity funds are the best option. By earning 5% on liquid funds, there is only so much wealth you can create. In the long run, the risk-return reward is extremely favourable for equity funds. 


3. Opting for dividend plans in SIP

Don’t commit the mistake of selecting dividend plans (IDCW). Dividends reduce your corpus and are also tax inefficient. Instead, opt for a growth plan which has in-built reinvestment of fund returns. SIPs are normally used for long term goals and it is easier to monitor growth plans against long term goals than dividend plans.


4. Losing sight of goals and discipline

For a SIP to be successful, there are two pillars. There should be a goal (retirement, child education, second home etc) that your SIP is specifically tagged to. That gives purpose. Second is having discipline. Once the SIP starts, all payments must be on time and never stop the SIP, unless it is absolutely unavoidable. Let time work in your favour. 


5. Timing SIP entry and timing themes

The truth is you don’t need to time your SIP. Even if you are great at timing, it makes little difference to SIPs overall. In SIPs, it is time in the SIP that matters more than timing. Another common time mistake is opting for SIP on sector funds and thematic funds because they are very popular. A long term SIP, should ideally be on a diversified portfolio only.  


6. Setting unrealistic expectations from SIP

As Sachin Tendulkar says, mutual funds are not magic funds. Same applies to SIPs. Don’t expect your SIP value to double in 4 years. You may have been lucky once, but that is not the rule. Don’t believe that SIPs are always on auto mode. These SIPs have to be regularly monitored against your goals and appropriate changes made where warranted. 

You can get it right by not getting the basics wrong.