5 SIP mistakes that can lower returns

SIP Investment: An Investment Plan, or SIP, stands as one of the simplest and most convenient methods to generate long-term wealth. It operates on the premise that consistent and disciplined investments eventually lead to a substantial corpus. It’s as straightforward as that. However, certain investors fail to maximize their SIP returns due to common investment errors.

In this blog post, we aim to highlight common mistakes to avoid while investing in SIPs, ensuring optimal returns on your investments. We will provide valuable insights on how to maximize the benefits of your SIP investments by steering clear of these fundamental errors. Keep reading to make the most of your SIP investment journey!

5 Points to Remember while doing SIP Investment

SIP investment mistakes
investment mistakes

1. Skipping SIP

Maintaining a disciplined and consistent approach to SIP investment is crucial for staying fit and healthy. However, neglecting their SIPs is a common mistake that many investors make, which ultimately prevents them from achieving their desired outcomes.

Let’s understand the adverse impact of skipping SIPs with an illustration.

Assuming an initial investment of Rs 10,000 through monthly SIPs in the NIFTY 50, spanning from January 2006 to June 2021 (a period of 15 years and 6 months), the principal funding amounts to a total of Rs 18.60 lakh (186 months * Rs. 10,000). The final value of the investment at the end of this tenure stands at Rs 53.6 lakh, yielding an impressive average annual return of 11.9%. However, if you had missed 15 SIPs by skipping the December installment each year, your total investment value would have declined to Rs 49.4 lakh.

To grasp the magnitude of the missed opportunity, consider this: by abstaining from 15 systematic investment plans (SIPs) – equivalent to not investing Rs 1.5 lakh (Rs. 10,000 * 15) – you forfeited the chance to earn a substantial sum of Rs. 4.2 lakh.

ParticularsBenefits Of Continuing SIPs UninterruptedConsequence Of Skipping SIPs
Monthly SIP₹10,000₹10,000
Total investment in NIFTY 50 between January 2006 and June 2021₹18.60 lakh₹17.10 lakh
Total investment value₹53.6 lakh₹49.4 lakh
Opportunity Lost By Skipping SIPs = ₹4.2 lakh

The key takeaway is to exercise patience and discipline when investing in the stock market for the long term. It is crucial to remain committed to making consistent investments throughout the investment period. With steadfastness and dedication, success in stock market investing can be achieved.

2. Not Increasing SIP Investment Amount

While numerous investors opt for Systematic Investment Plans (SIPs), only a handful consider augmenting their contributions as their income and surplus grow each year. This oversight proves to be a significant misstep, as career advancement often leads to higher earnings and an improved lifestyle. Embracing the opportunity to increase investment along with income can yield lucrative results in the long run.

Maintaining an enhanced lifestyle becomes challenging when expenses rise without a corresponding increase in investments. To mitigate this, it’s crucial to periodically boost your monthly systematic investment plan (SIP) amount. As your investment corpus grows, the power of compounding enables you to reap higher returns and derive greater benefits.

Let’s delve into an illustration that vividly demonstrates the significant impact of increasing SIP investments. Imagine initiating your investment journey with a monthly SIP of Rs. 5,000. With an average annual rate of return of 12%, let’s explore how varying increments in SIP investment each year can shape your accumulated investment after a span of 20 years.

% Increase In SIP Every YearPrincipal Investment In 20 YearsTotal Corpus After 20 Years
0₹12 lakh₹49.96 lakh
5₹17.70 lakh₹82.77 lakh
10₹23.40 lakh₹1.15 crore
15₹29.10 lakh₹1.48 crore
20₹34.80 lakh₹1.81 crore

The table clearly demonstrates that by increasing the SIP amount annually, the potential earnings are substantially higher compared to maintaining a fixed SIP amount. Taking this approach allows for greater financial gains, making it a wise choice for maximizing returns over time.

In the aforementioned example, by gradually increasing the monthly SIP amount by only Rs. 1000 each year (equivalent to 20% of Rs. 5,000), you end up amassing a corpus that exceeds three times the amount you would have earned if there were no increments. This highlights the substantial impact of consistency and incremental growth over a span of 20 years.

3. Opting For IDCW Plans Rather Than Growth Plans

One of the key reasons why Systematic Investment Plans (SIPs) in mutual fund schemes can help investors accumulate substantial wealth over the long term is due to the magic of compounding. However, to fully harness the power of compounding, it is crucial to reinvest the returns obtained from your mutual fund scheme. This is where investors often go wrong when they opt for the IDCW plan (formerly known as the Dividend Plan) of a mutual fund scheme.

A dividend plan, or IDCW plan, in a mutual fund scheme, offers intermittent returns to investors. However, this approach diminishes the power of compounding and limits the potential for maximizing long-term returns. It’s important to consider alternative strategies to optimize your investment growth.

When initiating a Systematic Investment Plan (SIP) in a mutual fund scheme, it is advisable to opt for the Growth Plan. Under the Growth Plan, the scheme doesn’t provide regular payouts; instead, it reinvests all returns, resulting in accelerated compounding of your wealth. This strategy facilitates optimal growth and capital appreciation over time, ensuring greater financial benefits.

4. Not Having SIPs For Specific Goals

You may have a multitude of aspirations you wish to accomplish in the future. Some goals may be short-term, to be achieved in the coming months, while others are long-term, with a timeframe spanning 10, 20, or even 30 years.

It would be a significant error to begin one or two SIPs without carefully contemplating your future goals. Such an investment approach is analogous to boarding a random bus without a destination in mind. To ensure a well-informed and purposeful investment strategy, thoughtful consideration of your objectives is crucial.

To ensure the effective attainment of your financial goals—be it retirement, your child’s education or wedding, or that dreamy foreign holiday—it is imperative to align your Systematic Investment Plans (SIPs) accordingly. Such an approach empowers you to make astute investment decisions, including scheme selection and optimal redemption timing.

Furthermore, beginning your SIPs with specific goals in mind increases the likelihood of consistent continuation. The presence of a clear objective serves as a strong source of motivation to persist with your SIP. It is crucial to recognize that discontinuing your SIPs halfway would impede your progress toward achieving your goals.

5. Not Monitoring SIPs Periodically

Initiating a SIP investment marks the commencement of your investment expedition, but it’s far from the culmination. Regularly scrutinize your SIP investments vis-à-vis your long-term objectives to ensure they align harmoniously. Stay attuned to their progress and adapt accordingly.

To achieve your goals, it is crucial that you annually review your SIPs across various schemes. This evaluation will provide valuable insights into the performance of mutual fund schemes, highlighting those that have met or exceeded your expectations, as well as those that have underperformed. If a scheme has consistently underperformed for a period of 18–24 months, it may be prudent to consider exiting from that particular scheme.

Another advantage of monitoring SIPs is the ability to rebalance your portfolio in response to significant changes in your asset allocation. This ensures optimal word choice, improved structure, enhanced readability, and eloquence while retaining the original meaning intact.


In conclusion, keeping an eye on your SIP will not only assist in eliminating underperforming funds but also ensure that your portfolio’s risk is well-balanced across different asset classes. This proactive approach to monitoring will enhance the overall quality and stability of your investment strategy.

By following these best practices, you can maximize the potential of your mutual fund SIP investment and achieve your desired results. ze the potential of your mutual fund SIPs and achieve your desired results. Regularly monitor the progress of your SIPs.Align your SIPs with specific financial goals.

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