Investment in SIP Is Good or Bad

Explore if SIPs are right for you. Compare mutual funds, customise plans, and invest easily with the Bajaj Finserv Mutual Fund Platform.
INVEST NOW
Investment in SIP Good or Bad?
INVEST NOW
3 mins read
23-May-2025

Have you ever wondered if starting a SIP is truly the right move for your money? With so much talk about mutual funds and market ups and downs, it's easy to feel confused. Systematic Investment Plans (SIPs) have become one of the most popular investment methods for a reason—they’re simple, consistent, and work well for many goals. But that doesn’t mean SIPs are always the best choice for everyone.

If you have been unsure whether a SIP is right for your financial journey, the best way to decide is to see how it aligns with your goals, budget, and time horizon. Understanding the role SIPs play in long-term wealth creation can help you invest with clarity not confusion. Explore mutual fund SIPs that match your goals

In this article, we’ll break down when SIPs work in your favour and when they might not. Whether you're just starting out or already investing, this guide will help you understand the good, the bad, and how to make SIPs work for you.

What is SIP?

A Systematic Investment Plan (SIP) is a smart way to invest in mutual funds without needing a big lump sum. Instead, you contribute a fixed amount at regular intervals usually monthly. Over time, this helps you build wealth steadily, no matter how the market is performing. SIPs are designed to make investing simple and accessible, especially for people who want to develop good financial habits.

Because SIPs allow you to start small and stay consistent, they are ideal for first-time investors who want to build disciplined habits without worrying about market timing or big one-time investments. Start investing or SIP with just Rs. 100!

Why SIP is a good investment

SIPs have several advantages that make them appealing to both new and experienced investors:

  • Power of compounding: SIPs grow your money over time by reinvesting your returns. This creates a snowball effect, helping your investment grow faster the longer you stay invested.

  • Rupee cost averaging: When markets are down, you buy more units; when markets are up, you buy fewer. Over time, this evens out the cost and reduces the risk of investing at the wrong time.

  • Discipline without pressure: SIPs make you invest consistently, which builds long-term discipline. You don’t need to think about timing the market—just stay regular.

  • Start small: You don’t need a huge amount to begin. SIPs start from as little as Rs. 100 per month, making them accessible to almost anyone.

  • Avoiding market timing: Since SIPs invest consistently across market cycles, you’re not stressed about whether the market is high or low.

Pro Tip: You can use tools like the Bajaj Finserv SIP Calculator to estimate your potential returns based on your SIP amount, tenure, and expected growth.

Pro tip

EFFORTLESS investing | FLEXIBLE options | ROBUST growth 
Access diverse Mutual Funds conveniently. 
Exclusively on our digital platform.

MF Pro Tip banner Effortless

Situations where SIPs may not be the right fit

While SIPs work well for many investors, they aren't perfect for every situation. Here are a few cases where SIPs might not be the most effective option:

  • You are close to reaching your financial goal
    SIPs are ideal for long-term goals, not short-term needs. If you are just a year or two away from needing the money for example, to pay for your child’s college fees or a home down payment you may want to shift to lower-risk, more liquid options. SIPs in equity funds may expose you to market dips when you can’t afford to wait.

  • Your income is unstable
    SIPs need regular, timely contributions. If your income is unpredictable or irregular, maintaining a consistent SIP might become stressful. Missing SIPs occasionally is okay, but frequent disruptions can derail your wealth-building plan.

  • The fund is underperforming
    Not all mutual funds are created equal. If the SIP is linked to a consistently underperforming fund, your returns will suffer. It’s important to monitor fund performance regularly. If things aren’t improving over time, consider switching to a more consistent scheme that aligns with your financial goals.

Common myths about investing in SIP

There’s no shortage of myths and misconceptions around SIPs. Let’s bust a few of the most common ones:

  • SIP means guaranteed returns
    SIPs don’t promise guaranteed returns. Like any market-linked investment, they carry risk. The key is consistency and long-term commitment—not short-term gains.

  • Avoid SIPs during a bull market
    Many think SIPs only work when markets are falling. Not true. SIPs average out costs whether markets are up or down. Skipping SIPs during a bull run may cause you to miss valuable gains.

  • SIP is only for small investors
    While SIPs are popular among small investors for their affordability, they’re also great for large investments. You can scale your SIP to match your income and goals even high-net-worth investors use SIPs strategically.

  • You cant change SIP amounts or tenure
    SIPs are flexible. You can increase, decrease, pause, or even stop them as your needs change.

  • SIP is only for equity funds
    Not at all. SIPs can be used for investing in debt, hybrid, and even gold mutual funds—not just equities.

  • SIP is an investment product
    SIP is a method, not a product. It’s a way to invest in mutual funds consistently, not a type of fund.

  • SIP is only for short-term goals
    While you can use SIPs for short-term targets, they really shine when used for long-term goals like retirement, child’s education, or wealth creation.

If you feel your current SIP isn’t delivering as expected, it might be time to reassess and explore better-performing alternatives. With the right platform, comparing mutual fund options becomes quick and insightful helping you switch smartly and stay on track with your goals. Compare mutual fund options now!

Common mistakes to avoid while investing in SIPs

SIPs are powerful tools—but only when used wisely. Here are some mistakes you should steer clear of:

  • Waiting too long to start
    Time is your biggest ally in investing. Starting early—even with a small amount—lets compounding work its magic. Delaying means losing years of potential growth.

  • Believing you need a big amount to start
    You don’t. SIPs are meant for everyone. Starting with Rs. 500 a month is better than waiting to invest a lump sum later.

  • Trying to time the market
    SIPs are designed to eliminate the need for market timing. Don’t overthink entry points consistency matters more than trying to catch the lowest price.

  • Pausing SIPs during market lows
    This is a common but costly mistake. Market dips are actually opportunities in disguise. When you pause SIPs during corrections, you miss out on buying more units at lower prices.

Conclusion

So, is SIP good or bad? Well, it really depends on you. If you’re someone with long-term financial goals, want to invest consistently, and don’t want the stress of timing the market, SIPs can be an excellent choice. But if your goals are short-term, your income is unpredictable, or your fund isn’t performing well, it might be worth rethinking.

At the end of the day, SIPs are just a method how effective they are depends on where and how you use them. Take time to review your financial situation, define your goals, and choose a plan that fits your needs. Because when done right, SIPs can be one of the simplest and most effective ways to build wealth over time.

If you are looking for a simple way to invest in mutual fund schemes, visit the Bajaj Finserv Mutual Fund Platform today. With 1,000+ different fund options to choose from, you can surely find one that fits your requirements. Additionally, you can also compare the mutual fund returns of different schemes on the platform to help you make your decision easier.

Essential tools for all mutual fund investors

Mutual Fund Calculator

Lumpsum Calculator

Step Up SIP Calculator

Axis Bank SIP Calculator

SBI SIP Calculator

HDFC SIP Calculator

Nippon India SIP Calculator

ABSL SIP Calculator

ICICI SIP Calculator

Invesco SIP Calculator

Motilal Oswal Mutual Fund SIP Calculator

Kotak Bank SIP Calculator

Frequently asked questions

Is SIP safe for investment?

SIPs are generally considered safe as they allow for disciplined investing in mutual funds, but they are subject to market risks.

Is SIP better than FD?

SIPs offer the potential for higher returns over the long term compared to FDs, which typically offer fixed returns but lower potential growth. But it it important to note that there are potential risks involved while investing in mutual funds via SIP as well, since they are market linked.

Is SIP tax-free?

SIP investments are not tax-free; they are subject to taxation based on the type of mutual fund and the duration of the investment.

How is SIP beneficial to investors?

SIPs offer benefits such as rupee cost averaging, compounding returns, and flexibility in investment amounts and tenures, helping investors build wealth over time.

Can I lose money in SIP?

Yes, SIP investments are subject to market risks, and there is a possibility of losing money depending on market fluctuations and the performance of the mutual funds.

How to start an SIP?

To start an SIP, you need to choose a mutual fund scheme, fill out the SIP registration form provided by the fund house, specify the investment amount and frequency, and provide necessary KYC documents.

Can I make a lumpsum investment along with SIP?

Yes, investors can make lump sum investments in addition to SIPs, providing flexibility to invest larger amounts periodically or as desired.

Is SIP good or bad for the long term?

SIP is highly effective for long-term investments as it benefits from the power of compounding and rupee cost averaging. By investing consistently over time, investors can build substantial wealth, even during market fluctuations. However, its success depends on fund selection and discipline, making it a great option for those with a long-term horizon.

Is SIP suitable for long-term or short-term investments?

SIP is ideal for long-term investments as it helps to weather market volatility and allows compounding to maximise returns. For short-term goals, SIPs may not be as effective due to limited time for market recovery or growth. Always align your SIP duration with your financial objectives for optimal results.

Can SIP help mitigate market volatility?

Yes, SIPs reduce the impact of market volatility through rupee cost averaging. By investing a fixed amount regularly, you purchase more units when prices are low and fewer units when prices are high. This strategy smoothens out price fluctuations and ensures steady investment growth over time.

Are there risks associated with investing through SIP?

While SIPs help mitigate market volatility, they are not entirely risk-free as they depend on market performance. Poor fund selection or inadequate diversification can affect returns. Additionally, short-term market downturns may impact portfolios, but these risks are minimised with long-term investments and proper financial planning.

Can SIPs generate consistent returns over time?

SIPs can offer relatively stable returns over the long term, especially in equity funds, due to compounding and disciplined investing. While short-term returns can fluctuate due to market conditions, consistent investments in SIPs tend to yield positive outcomes over extended periods, helping investors achieve their financial goals.

What factors determine whether SIP is good or bad for an investor?

SIP suitability depends on the investor’s goals, risk tolerance, and investment horizon. For long-term goals, SIPs are advantageous due to compounding and market averaging. However, if an investor lacks discipline or chooses funds unsuited to their risk profile, SIP performance may not meet expectations.

Is SIP a good choice for beginners in mutual fund investing?

Yes, SIPs are perfect for beginners as they allow systematic, small investments without the need to time the market. SIPs encourage financial discipline and are easy to start with minimal amounts. Over time, beginners can gain confidence and expand their portfolios as they understand the market better.

What common mistakes should be avoided while investing in SIPs?

Common SIP mistakes include delaying investments, trying to time the market, and pausing SIPs during downturns. Additionally, not reviewing fund performance regularly or ignoring goal alignment can affect outcomes. To maximise SIP benefits, start early, stay consistent, and select funds based on your objectives and risk appetite.

Show More Show Less

Related videos

Bajaj Finserv app for all your financial needs and goals

Trusted by 50 million+ customers in India, Bajaj Finserv App is a one-stop solution for all your financial needs and goals.

You can use the Bajaj Finserv App to:

  • Apply for loans online, such as Instant Personal Loan, Home Loan, Business Loan, Gold Loan, and more.
  • Invest in fixed deposits and mutual funds on the app.
  • Choose from multiple insurance for your health, motor and even pocket insurance, from various insurance providers.
  • Pay and manage your bills and recharges using the BBPS platform. Use Bajaj Pay and Bajaj Wallet for quick and simple money transfers and transactions.
  • Apply for Insta EMI Card and get a pre-qualified limit on the app. Explore over 1 million products on the app that can be purchased from a partner store on Easy EMIs.
  • Shop from over 100+ brand partners that offer a diverse range of products and services.
  • Use specialised tools like EMI calculators, SIP Calculators
  • Check your credit score, download loan statements and even get quick customer support—all on the app.

Download the Bajaj Finserv App today and experience the convenience of managing your finances on one app.

Do more with the Bajaj Finserv App!

UPI, Wallet, Loans, Investments, Cards, Shopping and more

GET THE APP

Disclaimer

Bajaj Finance Limited (“BFL”) is an NBFC offering loans, deposits and third-party wealth management products.

The information contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. 

This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.

Disclaimer:

Bajaj Finance Limited ("BFL") is registered with the Association of Mutual Funds in India ("AMFI") as a distributor of third party Mutual Funds (shortly referred as 'Mutual Funds) with ARN No. 90319

BFL does NOT:

(i) provide investment advisory services in any manner or form:

(ii) carry customized/personalized suitability assessment:

(iii) carry independent research or analysis, including on any Mutual Fund schemes or other investments; and provide any guarantee of return on investment.

In addition to displaying the Mutual fund products of Asset Management Companies, some general information is sourced from third parties, is also displayed on As-is basis, which should NOT be construed as any solicitation or attempt to effect transactions in securities or the rendering any investment advice. Mutual Funds are subject to market risks, including loss of principal amount and Investor should read all Scheme/Offer related documents carefully. The NAV of units issued under the Schemes of mutual funds can go up or down depending on the factors and forces affecting capital markets and may also be affected by changes in the general level of interest rates. The NAV of the units issued under the scheme may be affected, inter-alia by changes in the interest rates, trading volumes, settlement periods, transfer procedures and performance of individual securities forming part of the Mutual Fund. The NAV will inter-alia be exposed to Price/Interest Rate Risk and Credit Risk. Past performance of any scheme of the Mutual fund do not indicate the future performance of the Schemes of the Mutual Fund. BFL shall not be responsible or liable for any loss or shortfall incurred by the investors. There may be other/better alternatives to the investment avenues displayed by BFL. Hence, the final investment decision shall at all times exclusively remain with the investor alone and BFL shall not be liable or responsible for any consequences thereof.

Investment by a person residing outside the territorial jurisdiction of India is not acceptable nor permitted.

Disclaimer on Risk-O-Meter:

Investors are advised before investing to evaluate a scheme not only on the basis of the Product labeling (including the Riskometer) but also on other quantitative and qualitative factors such as performance, portfolio, fund managers, asset manager, etc, and shall also consult their Professional advisors, if they are unsure about the suitability of the scheme before investing.


Disclosure: Bajaj Finance Limited (BFL) is a distributor of Mutual Funds with ARN - 90319 and distributes mutual funds of Bajaj Finserv Asset Management Limited (BFSAMC). BFL receives commission towards distribution of mutual fund products. BFSAMC is a group company of BFL, carrying business on arm’s length basis without any conflict of interest and in accordance with the prevailing law / regulation.