There’s always some noise about SIPs being terrible 
It’s always good to understand what a SIP is exactly, and what it can and can’t do.
1. SIP is not a strategy.
A SIP is just a systematic and regular way of investing money in different asset classes like equity, debt, and gold. That’s it. There’s nothing magical about a SIP.
SIP is just one way of saving and investing for your goals.
2. It’s not the SIP; it’s what you SIP into.
You cannot SIP into terrible funds and asset classes and magically expect good returns. What you invest in is more important than how you invest (SIP or lumpsum).
3. SIP doesn’t reduce risk.
No matter how you invest, your investments are still exposed to market movements. You must manage risk through asset allocation for as long as you invest. For example, reducing equity exposure as you grow older reduces the risk. This is one way.
To reiterate, SIP is just a way of investing in various asset classes. It’s not some magical “strategy” that reduces your risk and maximizes returns.
So, are SIPs useless?
No.
When investing, we tend to be our own worst enemies. Most investors have poor outcomes because they do all the wrong things at the wrong time. In other words, investors have a hard time managing their behavior.
1. SIPs help build a habit.
Let’s say you had to invest manually vs. investing automatically. The odds are you would miss investing in some months because we’re all lazy sometimes🙂
Since SIPs are automated, they help you save and invest more without having to think about it.
2. SIPs help you with your behavior.
One of the biggest mistakes investors make is getting scared when markets fall. To an extent, SIPs help since money gets invested automatically regardless of market levels.
Are SIPs perfect?
Someone once said, “SIPs are the worst way of investing compared to the rest,” which perfectly sums it up.
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There are always better strategies. If you can do better than a SIP, you definitely should, but most investors can’t. The goal is to invest regularly.
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The most annoying argument of all is: SIPs won’t help if India becomes Japan and has no returns for 30 years. If Indian markets have a Japan-like phase and SIPs don’t work, what will? Market timing and trading? Well, we all know how good we are at those things
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For most people, investing through SIPs, and having a sensible asset allocation to equity and debt is the best thing. They are better off focusing on their careers rather than fussing over whether SIP is good or bad.
Remember, your careers pay for the SIP, not the other way.
Returns on SIP is not the only thing that matters. You are investing to reach a goal, and you should look at the returns in relation to that.
Your goals are your real benchmark, not just maximizing your returns.
There’s no shortage of gyan on how to maximize returns and why SIPs are terrible etc. But most of it is noise; you are better off ignoring everything and focusing on what matters.
If you want to learn more, start here: