How to Invest in SIP: The Cardinal Dos and Don’ts

To enjoy a sound financial status in life, you need to make judicious investments. SIPs offer you the simplest way to invest in mutual funds with relatively low risk. If you are hesitant about lumpsum investments and their probable perils, SIP might be the ideal choice for you.

Systematic Investment Plans (SIP) are getting more popular among investors for their rupee cost averaging and compounding benefits. The lure of flexibility in SIP plans has been an important factor that attracts investors. By choosing the right SIP plan, you can attain your financial goals within your desired timeline.


Here are a few Dos that you need to keep in mind while investing in SIP.

  • Have Clarity About the Purpose and Requirements of the Investment: Before starting your investment, be clear about your goals. That includes the intention behind the investment and the preferred time for the achievement of your goals. Understand what SIP entails before venturing into an investment. Determine your financial capacity and whether you can afford to put away the required amount monthly without strain on your budget.
  • Choose the Right Fund House and Fund Scheme: Do exhaustive research before picking a fund house. Different fund houses handle market volatility differently. You need to find one that has a proven track record during market fluctuations. Always judge a fund house by its performance over a longer period to assess its stability. Depending on your financial goal, select a suitable fund scheme. If you are a new investor, it won’t hurt to use the expertise of financial advisors before making your choice. Understand the risk level of each scheme and decide on the ones that fit your financial capability.
  • Select a Convenient Sip Frequency, Duration, and Date: The flexibility of SIPs facilitates you to choose how often you want to make your payment. Keeping your other financial obligations in mind like big EMIs, choose whether you want to pay monthly, quarterly or yearly. Fund houses also offer a choice of dates when the amount will be debited from your account. Select date according to your schedule of income. If you have a long-term goal like building wealth or retirement plan, choose the relevant SIP duration. Goals like vacation plans can involve a shorter duration of investments.

SIP is considered a reasonably safe investment, but it is better to be watchful to avoid any pitfalls. Here are few Don’ts to consider while investing through SIP.

  • Choosing the Wrong Amount to Invest: Understandably, you may want to make a small investment in the beginning to test the waters. A smaller investment will naturally result in lesser gains, and hence, it is essential to choose a reasonable amount to invest to see substantial returns. Being overambitious while making investments can also ruin your peace of mind. Don’t go for an amount that will be a huge burden on your budget.
  • Selecting the Wrong Tenure- To enjoy the rupee cost averaging benefit of SIP, it is essential to stick with your SIP plan. Curb your urge to withdraw your investment once it delivers comfortable returns. Perseverance can go a long way in fulfilling your long-term ambitions.  
  • Knee-Jerk Reactions to Market Variations: The volatility of the market can be daunting for new investors. Impulsive decision to stop your SIP during a market fall can result in substantial losses. It will be wiser to stay put with your SIP plan because markets can rise too. Understanding the behavior of markets and how to invest in SIP will help you make a regular and disciplined investment that will reap benefits over a period of time.

Although SIPs are a simpler way to invest in mutual funds, it will be a mistake to assume that it is completely free of risks. By being attentive while making decisions regarding your SIP plans, you will be better equipped to deal with market fluctuations and enjoy high returns.