Are Your SIPs Delivering Flat, FD-Like Returns? Here’s The Real Cause

Most first-time investors start investing in mutual funds via a systematic investment plan (SIP) with confidence, hoping to build long-term wealth. But certain mistakes made by them can actually force their mutual fund investments to start behaving like bank fixed deposits – steady, safe, and underwhelming. The worst part is that such investors do not even realise the changing nature of their investments.

Here are the three mistakes that SIP investors should avoid if they truly want to create wealth in the long term.

Starting Only When Markets Look ‘Safe’ i.e., At All-Time-Highs

A common pattern among new investors is starting SIPs only when stock markets are at all-time highs. Social media noise, headlines, and peer pressure create the illusion of safety. The problem here is that such investors who begin at market highs, when everything looks its best, end up pausing their SIPs during the first correction they witness. This destroys the benefit of rupee-cost averaging. 

Skipping SIPs in down markets means missing out on cheaper units, which is the key driver of long-term returns.

Playing Too Safe

Another silent mistake many investors make is filling their entire SIP portfolio with only ‘safe’ categories like large-cap funds, conservative hybrid funds, or balanced advantage funds. These funds are stable, but they may not deliver the kind of long-term growth that investors usually expect from equity investing.

The whole idea of a SIP is that it works best when markets are volatile. You keep buying more units when markets fall and fewer when they rise, which lowers your average cost and boosts long-term returns. But if your SIPs are concentrated only in steady, low-volatility categories, you miss out on the real benefit of volatility.

In such a case, your portfolio may feel very safe, but it will also grow slowly, almost like a bank FD, predictable, but not powerful enough to create meaningful wealth over the long term.

Switching Funds Too Often

Many novice investors fall into the trap of switching funds too often. They jump from one fund to another whenever the fund underperforms during the short term. Investors get scared during market dips or hear some influencer recommending a ‘hot’ fund. But every time you switch, you reset the compounding process, hurting your money’s growth.

Over many years, this habit quietly destroys wealth and stops you from benefiting from long-term compounding.

The Right Way To Invest Via SIPs

For mutual fund SIPs to work, investors must allow time and discipline to do the heavy lifting. You should continue during all market phases; in fact, add more during corrections if possible, and avoid unnecessary switches. SIPs fail not because markets are volatile, but because investor behaviour is.