SIPs help you build wealth without timing the market — but here’s what they don’t fix

Systematic Investment Plans (SIPs) have gained immense popularity among retail investors in India, and for good reason. They offer a disciplined approach to investing, allowing individuals to build wealth gradually over time without the need for constant market monitoring. 

Unlike active investing, which often involves trying to guess the best times to buy or sell, SIPs are built on the principle of consistency over speculation. You invest a fixed amount at regular intervals—monthly, quarterly, or otherwise—regardless of whether the market is soaring or slumping.

This regular investment ensures that you accumulate mutual fund units at different price levels. When the market is down, your fixed SIP amount buys more units; when the market is up, it buys fewer. Over time, this leads to rupee-cost averaging, which helps lower your average cost per unit and shields you from short-term price volatility. The strategy doesn’t rely on market timing but rather on the market’s long-term upward trend and the power of compounding.

What is in favour of SIPs

One of the strongest advantages of SIPs is the disciplined entry they enforce—investors contribute fixed amounts at regular intervals, which helps eliminate emotional decision-making and avoid impulsive buying during market highs or panic selling during crashes.

"SIPs offer an effortless way to work towards financial goals by ensuring consistent contributions, irrespective of market fluctuations. The focus isn’t on predicting when the market will rise or fall, but on staying committed to a steady investment plan. With each SIP, your money buys more units when prices are low and fewer units when prices are high, which averages out the overall cost over time. This long-term strategy eliminates the stress of trying to time the market and helps build wealth gradually. Since the success of SIPs depends on consistency and time, it allows you to focus on your broader financial objectives without worrying about short-term volatility. By following this disciplined approach, you’re likely to achieve your goals without getting caught in the ups and downs of the market," said Sarvjeet Singh Virk, MD & Co-founder, Shoonya by Finvasia.

Market momentum

Another key benefit is how SIPs partially ride market momentum. When markets fall, the same investment amount buys more units, and when markets rise, it buys fewer units. This rupee-cost averaging ensures that investors benefit from volatility rather than fear it. Over time, this can lead to a favorable average purchase price. Moreover, SIPs are ideally suited for passive investors—those who lack the time, expertise, or inclination to track financial markets actively. SIPs automate the most difficult aspect of investing: entering the market at the right time.

Why you should continue your SIPs

Market downturns are inevitable, but they also offer some of the best opportunities for long-term investors. Many retail investors panic during crashes and pause or stop their SIPs—often the worst decision one can make. In reality, continuing SIPs during bear markets allows you to buy more units at lower prices, positioning your portfolio to benefit strongly when the market eventually recovers.

By staying invested through the lows, you also avoid emotional decision-making, which often leads to buying high and selling low—the exact opposite of a wealth-building strategy. History has shown that markets are cyclical and have always bounced back from corrections and crashes. Those who remained consistent with their SIPs during turbulent times were typically better off than those who tried to exit and re-enter.

"Investing is not always about chasing the highest point-to-point returns, but is more about staying on a steady path, navigating the changing economic and market conditions, and avoiding any impulsive decisions. One common mistake that most investors make is pulling out of an asset class entirely during periods of market downturns. This often leads to missed opportunities when the market recovers. Infact, volatile phases are the best times to continue, or even increase SIP investments. Staying in cash during these phases may seem safe, but over time, it can result in lower overall returns compared to that earned through regular SIP investments. By continuing SIPs through the lows, investors position themselves to benefit when markets eventually move upwards," said Shaily Gang, Head-Products, Tata Asset Management. 

However...

Some experts feel SIPs are not a perfect solution. One of their major shortcomings is the lack of an exit strategy. While SIPs automate entry, they leave investors vulnerable if they don't have a clear plan to withdraw or rebalance. For example, during major crashes like those in 2008 or 2020, SIP investors saw their portfolio values drop sharply, potentially erasing years of gains if they were nearing financial goals at the time.

SIPs also lack capital rotation. Unlike more active strategies that shift funds between asset classes (e.g., from equities to bonds or gold based on market conditions), SIPs remain confined to the chosen asset, even if it becomes overvalued. This inflexibility can hurt returns over time.

Further, SIPs are not immune to market cycles. If the market enters a prolonged flat or declining phase—such as Japan post-1989 or China in recent years—investors may experience stagnation in returns. And finally, sequence risk looms large for those retiring during a downturn. If a market crash coincides with one’s withdrawal phase, the retirement corpus could suffer a permanent dent.

"To make money from stock investing, you need 4 things: 
> Good point of entry 
> Riding the momentum/wave
> Exiting 
> Rotating capital to something else. 
When you SIP, you are just doing 1 and maybe 2. You are clueless about exiting or rotating capital.

And are prone to: 

- Massive drawdowns in the markets (like 2008, 2020) 
- And, in the super-long term: SIPs only work if the market keeps going up 
- There is NO guarantee that Indian markets will keep going up over the next 20-30 years," Akshat Shrivastava of Wisdom Hatch wrote on X.

Therefore, investors should remember -- SIPs are a tool, not a full strategy.

To succeed in long-term investing, especially if you're building serious wealth, you eventually need:

A rebalancing strategy (rotate capital across asset classes)

An exit plan (for specific goals or valuations)

Awareness of macro risks (like structural slowdown in the economy or overvaluation).