Investing in a Systematic Investment Plan (SIPs) is like planting a tree, you start small with a seed, water it consistently, and over time it grows into something fruitful. SIPs have become the go-to investment choice for many, from beginners to seasoned investors. They offer a simple, disciplined, and effective investment routine that is suitable for people across various income and professional groups.
But here’s the catch, even the best seeds won’t grow if you plant them wrong. Similarly, in the case of SIPs, certain mistakes can affect the desired outcome from your investments.
Here are common mistakes to avoid as you begin or expand your SIP in 2025;
1) Not Setting a Goal
Starting a SIP without clear financial goals is a beginner mistake that many would make. Whether you are saving for your dream home, child’s education, or a comfortable retirement - a goal is always good, if not necessary before beginning as an ‘investment purpose’. Without a clear goal, you may feel lost or unsatisfied with the results or mid-way and may end up going backwards on your investment strategy. So, before you set up an SIP in 2025, ask yourself; What am I saving for?
2) Picking Funds Randomly
Have you ever bought something just because it looked good only to realise later that it doesn’t suit you? Starting a SIP without checking out various funds could be the same. The common mistake to avoid here is choosing a mutual fund only because it is popular or someone suggested it to you.
Every fund has its own strategy, risk, and performance history - A smart move would be to take time to understand the fund’s track record and see if it matches your goals and risk appetite. Remember, what works for one person may not work in your favour, therefore informed choices always lead to better results.
3) Panicking or Halting SIPs Due To Market Fluctuations
A rookie mistake in long-term investing is to fall into the market jitters and halt running SIPs when the market looks bearish. You should remember that markets tend to go up and down, that’s a constant phenomenon. Panicking or stopping SIPs when markets are low not only leads you to losses but also stops you from benefiting from one of SIP's key strengths, which is ‘rupee cost averaging’. It allows investors to acquire more units at lower NAVs during market declines.
Remember, SIPs are for long-term wealth creation. Staying invested through market cycles is how one locks in better returns.
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5) Looking at Short-term Results
Considering the recent or short-term performance of the mutual fund during your fund selection can be a mistake. Short-term results could be temporary, however, if you analyse the long-term performance you can see the bigger picture. A well-established fund that has given strong historical returns could show a poor performance temporarily due to variations in fund management strategies or ongoing market fluctuations.
The ideal step is to evaluate the MFs for SIPs by looking at historical performance against benchmark indices and other funds for at least five, seven, or ten years. A performance analysis spanning over a decade will give you the picture of funds that rode throughout a complete economic cycle.
6) Review Portfolio, Not Obsessively
Are you someone who invests and forgets or checks on your portfolio for months? Or a person who goes multiple times to your investment platform to check returns multiple times a day or week?
Both these scenarios are bad for an investor. You should know that the market changes, your goals will eventually evolve, and not to forget - the fund of your choice could underperform at some intervals. Ignoring your SIP portfolio can mean missing out on opportunities or sticking with funds that no longer work for you. Make it a habit to review your investments every six months or once a year.
Bonus Tip: Don’t Keep Unrealistic Expectations
If you are just begun with your investment it is easy to get carried away during a bull or bear market. You should keep in mind that neither the market always goes up or stays in the bear zone. Therefore keeping unrealistic expectations can not only lead to disappointment but also impact your strategy and ultimately returns.
Aim to stay invested for at least five to seven years to ride out market ups and downs and truly benefit from your investment.
