Why Most SIP Strategies Fail to Build a Comfortable Retirement Corpus

For most investors, retirement planning starts with a systematic investment plan (SIP) in mutual funds. Start early, invest regularly, stay invested…simple enough. Yet, despite doing all this, many investors end up with portfolios that barely beat fixed deposits. The reason isn’t market returns. It’s how SIPs are misunderstood and misused.

The most powerful lessons about SIPs don’t come from “best fund” lists or glossy return tables. They come from what happens when investors stay disciplined even in the worst possible scenarios.

Here are a few lessons and strategies that would help you reach your long term goals, be it retirement, child education or generally creating massive wealth by investing through SIP in mutual funds.

What If You Pick the Worst Fund and Still Win?

Chasing the best mutual funds may not be necessary at all. Does it sound uncomfortable or not convincing enough?

At Outlook Money, we did a study on small-cap funds where an investor was assumed to start SIPs in the worst-performing small-cap fund of each year and continue investing without interruption. These weren’t average funds. These were bottom-ranked schemes.

The outcome? Surprisingly strong, inflation-beating returns.

For instance, an SIP started in ICICI Prudential Small Cap Fund in 2015, one of the worst performers that year, still delivered annualised SIP returns of nearly 20 per cent over a decade. A total investment of Rs 12 lakh done in installments, grew to about Rs 34 lakh.

So, this was how the worst performer of the year performed over the long term. Imagine the kind of returns an average performer of the year would have delivered. The lesson is not to buy bad funds. It’s this: time and consistency matter far more than short-term rankings. No fund stays the best or the worst forever. You can pick an average consistent fund and invest with a disciplined approach to accumulate desired retirement corpus.

Time Does the Heavy Lifting

The biggest edge that investors get is time and SIPs make good use of it quietly.

A monthly SIP of Rs 2,000 growing at 12 per cent becomes roughly Rs 4.5 lakh in 10 years. Extend that to 20 years, and it grows to about Rs 18.4 lakh. The monthly amount stays the same. Only time changes. This is why delaying investing can prove costly. You can’t easily make up for lost years by investing more later.

Consistency Matters More Than Fund Selection

SIPs are boring in the early years. The numbers look unimpressive. But consistency compounds with the snowball effect over decades.

A Rs 15,000 monthly SIP for 20 years at 12 per cent can build a corpus of around Rs 1.50 crore. Miss just one SIP every year, and the corpus may drop to nearly Rs 1.10 crore, a Rs 40 lakh gap created purely by inconsistent behaviour.

That’s the hidden cost of “pausing for a while.”

Don’t Let SIPs Turn into Fixed Deposits

Many long-term SIPs in mutual funds start behaving like fixed deposits (FDs) due to three common mistakes: starting only when markets feel safe, sticking exclusively to low-volatility funds, and frequently switching schemes based on short-term performance.

The irony is that SIPs work best when markets are volatile. Avoiding volatility defeats the very purpose of SIP investing.

Step-Up SIP: A Big Boost to your Final Corpus

One simple tweak can dramatically improve retirement outcomes: increasing SIPs annually.

Assume, two investors start investing Rs 5,000 per month. One keeps it constant. The other increases it by 10 per cent every year. Over 20 years at 12 per cent returns, the first investor builds around Rs 46 lakh. The second crosses Rs 93 lakh.

This is how topping up your SIP investment on an annual basis can amplify your final corpus. 

The Real Retirement Formula

The real retirement formula is simple, but uncomfortable: Investing in mutual funds through SIPs doesn’t protect you from market falls. When markets correct, SIP portfolios will fall too. But where SIPs protect investors is from timing the markets and stopping or pausing mid way. By investing every month irrespective of market levels, SIPs reduce the urge to time entries, panic during corrections. Their edge lies in smoothing volatility over long periods, not in avoiding it. Rupee cost averaging quietly lowers the average purchase cost, but only for those who keep investing when markets are down. Stop SIPs at market lows, and this advantage disappears.

To sum up, retirement wealth is rarely built through perfect timing or perfect funds. It is built by staying invested, stepping up gradually, and refusing to quit during uncomfortable phases. Over the long term, average choices backed by extraordinary discipline almost always beat brilliant choices with poor behaviour.