Mutual Fund Investing Doesn't Begin or End With SIPs—Strategy Is Essential

Leveraging SIP habits into effective wealth management tactics is key to financial health

- Kushal Bhagi

Once a niche concept, systematic investment plans (SIPs) have become a household name, with over 100 million accounts fueling India's investment boom. In fact, SIPs might be more widely recognized than mutual funds. Once considered a strategy for salaried individuals, SIPs have now gained popularity even among high-net-worth individuals (HNIs). While they promise discipline and long-term wealth creation, the question remains—can SIPs alone secure all financial goals, or a more diversified approach is needed?

SIP growth and market realities: You start a monthly SIP of ₹1 lakh, investing ₹60 lakh over five years. With a strong 15% CAGR, your portfolio grows to ₹90 lakh. But if the market takes a 25% hit, your investment shrinks to ₹67.5 lakh—leaving you with a modest 4.5% CAGR. Would this outcome be disappointing? Many investors may think so. Despite following disciplined investing principles, returns might barely match fixed deposit rates. This is not hypothetical; historical data shows that several five-year SIP periods in large-cap funds have delivered less than 5% CAGR, sometimes even negative returns. The situation is even starker for mid- and small-cap investments.