According to Mint reports, systematic investment plans (SIPs) require careful planning beyond simply investing in mutual funds. Investors should base their allocation on risk capacity, investment horizon, financial goals, and overall portfolio balance rather than following popular fund choices. Harendra Zatakia, a Sebi-registered investment advisor and founder of Wealth Aligned Financial Advisory, emphasizes that solely chasing returns by picking funds based on past performance can lead to disappointment. As reported by Mint, past performance does not guarantee future returns, and funds that performed exceptionally well may not remain market leaders forever.
According to Value Research analysis cited by Mint, the costliest mistake is stopping SIPs during market downturns when mutual fund units become cheaper. The report demonstrates this through a practical example where a ₹10,000 monthly SIP over four months accumulates 941 units when continuing through market correction, while pausing and resuming after NAV recovery results in only 800 units. The difference of 141 units is worth approximately ₹7,050 at the recovered NAV, showing why rupee-cost averaging works only when investors continue buying through market downturns. As reported by Mint, the benefit requires consistency, especially during uncomfortable market periods.
As reported by Mint, investors should avoid picking random funds and instead match fund choices with specific financial goals. For instance, someone saving for abroad education in three years should not treat an equity SIP the same way as someone saving for retirement 30-40 years away. Funds with higher equity exposure, particularly those investing in mid- and small-cap stocks, may offer greater growth potential but can experience significant short-term declines. Zatakia advises that investors should minimize exposure to high-risk funds if they need money within three to five years, noting that if small- and mid-cap allocation falls 40%, an honest investor would probably sell, indicating the allocation is already too high.
According to Mint reports, investors uncomfortable with volatility should choose more liquid funds that offer greater stability and are less prone to sharp changes. The analysis suggests that no market timing is required, just consistency, especially when markets feel most uncomfortable. Zatakia emphasizes that practical investing involves avoiding heavy reliance on small-cap performance if money is needed within three to five years, while someone investing for 15-20 years can take different equity risk levels. The key is to minimize exposure to high-risk funds if risk appetite is low or funds are needed in a few years.
