Daybreak - Are SIPs always right? Nah, says a new study

Episode Date: February 15, 2026

A mutual fund executive told our colleague something shocking: "SIPs are a problem." Part of the shock came from the fact that it  was coming from someone in an industry that was basically built on "SIP sahi hai."Now a new research paper backs up that controversial take—and the findings contradict what millions of Indian investors have been told about systematic investment plans.Turns out the marketing narrative around SIPs has some serious gaps. The math tells a different story. And with small-cap SIP assets exploding 6.5x since 2019, the stakes have never been higher.So when are SIPs actually appropriate?Tune in.If you have any thoughts on this episode write to us at [e-mail] with Daybreak in the subject line. You can also leave us a comment on our website or the YouTube channel here.Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Ramon Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get alert, as soon as we release our first video. episode, please follow intermission on Spotify and Apple Podcast or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. Hi, today you're in for a treat because we're doing something a little different on daybreak. I'm going to be reading out a really interesting edition of one of the Ken's most popular subscriber-only newsletter called Kaching, written by my colleague, Anand's Kalyana Raman.

And it is titled, Are SIPs always right? No, says a new study. In this one, Anand digs into a recent India-specific research paper that lays out a more nuanced reality than what the country's mutual fund marketing machine would have you believe. The paper prompted Anans to explore if SIPs are actually what they're largely believed to be. Are there really a foolproof way to invest in stocks? and do they actually guarantee growth and solve all your investment problems?

Welcome to Daybreak, a business podcast from the Ken. I'm your host, Rachel Viggis, and every day of the week, my co-host, Niktha Sharma and I will bring you one new story that is worth understanding and worth your time. Today is Monday, the 16th of February. A few months ago, a senior mutual fund executive told me something that made me do a double take. They said, SIPs are a problem. Now, I wasn't expecting to hear that from a beneficiary of an industry that came up with SIP

Sahihé He. This masterstroke of a pitch, which loosely translates as SIPs are appropriate, has captured the imagination of the Indian investor and helped the country's mutual fund market grow leaps and bounds over the past few years. Millions of retail investors are now religiously salting away money in systematic investment plans or SIPs, month after month in scores of mutual fund schemes, mostly those that invest in stocks. Every new month sees record inflows with over 29,000 crore rupees coming in in September 2025. The executive scribe was with the way the mutual fund industry marketed and projected SIPs. As a fail-proof number go up, panish for all is more of deploying money into the equity market.

I again did a double take when Sanjeev Prasad, the managing director and co-head of Kotak institutional equities, debunked the mutual fund hype in a hard-hitting interview with the Ken last September. He pointed out that 40% of retail inflows since 2021 have yielded zero returns. Safe to say that a good part of those inflows came from SIPs. These two interactions set me thinking, are SIPs? really sahi? I started looking for data to test the hypothesis and it's as if Rajan Raju heard me. Last month, Raju, who runs in Westpar-Pete, a single-family office in Singapore, published a research paper titled with the exact same question. Are SIPs really sari? A continuous time analysis of systematic investment plans in Indian equity markets. It's a mouthful and it's packed with numbers,

math, stats and calculations. It's fun for the geeks. But it's also packed with insights and conclusions that offer a far more nuanced perspective of SIPs than what the marketing machine of India's mutual fund industry would have you believe. As the paper puts it, current SIP Sahihair messaging oversimplifies complex tradeoffs

and may contribute to unrealistic expectation formation. Put very simply, the paper concludes that SIPs are not always SIPs are but subject to conditions conditional appropriateness as it were the paper, a more detailed

and current extension of Raju's earlier 2022 study arrived at its conclusions after running the numbers on SIPs for 20 years from May 2005 to July 2025 for five NSE Indices. Nifty 50

mid-cap, small cap, momentum and low volatility. Its key findings go against popularly peddled and accepted wisdom. Are SIPs always safe as the marketing goes? And do they always make money? Nope. Even after long periods, SIPs run the probability of shortfall. Essentially, the risks that you could end up with less than what you put in.

In fact, SIPs carry a higher probability of shortfall than lump sum investing, which is basically investing a bigger sum all at once over 5 to 7 year periods as well, even if there is lower volatility. According to the study, looking at Indian equity funds from 1999 to 2021, at the 3-year mark, SIPs show a shortfall probability above 6% versus under 5% for lump sum investments. At 5 years, SIP still had a 2 to 3% chance of losses while Lumsum had worse. virtually no probability of shortfall. And when losses did occur with SIPs,

the average shortfall frequently exceeded 10% of the invested capital. Okay, so do SIPs at least come with higher returns? Again, no. Because since SIPs stagger investments, they sacrifice significant wealth creation potential compared with lump sum investments. For instance, according to Raju, over 2005 to 205 to 20,

a rupees 12-lack investment over 10 years would have got over rupees 48-lack if it was a lump-sum investment and only about rupees 28-lack if it was through an SIP. So the returns are lower and the risks are higher in SIPs. Then why do people still go for them? Well, it's simply because there is a behavioural case for SIPs. For most folks who invest in mutual funds from their regular incomes, like SACs, salaries such SIPs, that the paper refers to as accumulation SIPs, act as commitment devices and eliminate timing decisions because they align with how most such people receive their incomes.

Without a lump sum available, SIPs are the only way to invest in equity for such investors. But a lot of the SIP money has gone towards higher risk categories, the small and midcaps. Small cap SIP assets under management group. 6.5 times between 2019 and 2024. But at 5-year horizons, small-cap SIPs show a 14% shortfall probability. This, according to Raju, creates a mismatch, especially with investors from beyond the top 30 cities who now account for over 35% of new SIP investments.

As he puts it, high volatility assets, plus investors with limited financial literacy, plus marketing that emphasizes, safety equals significant expectation gaps. In fact, the study demonstrates critical gaps between the expectation created by current SIP messaging and the actual outcomes that investors see. Potential wealth sacrifices substantially exceed what are typical SIP investor expects and the safety benefits claimed in SIP marketing only work in certain specific cases over extended periods. As we've written before a few times, sequence of return.

risk playing out can also significantly impact outcomes in SIPs. Unfavorable return patterns early on can mean lower total gains. But this is something that is rarely acknowledged in marketing narratives. Hence, the study's verdict. SIPs are not universally sahy. It's conditional. They might work for folks who would otherwise never invest or are prone to making timing errors for risk-havers investors and systematic savers.

But it's not for those who are capital-rich with short-term horizons or those expecting safer investments. The paper calls for regulatory oversight to ensure that SIP marketing accurately communicates the risks and rewards and the terminal wealth implications instead of simplified narratives that may mislead investors who do not fully understand the math, especially individuals who are trying to use SIPs to build a corpus for the long-term, such as retirement. SIPs have their advantages. But it's not magical returns or lower risk. It's how they can help investors stay disciplined and avoid timing errors.

And setting realistic expectations right at the beginning is crucial. Daybreak is produced from the newsroom of the Ken India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription offers daily long-form feature stories, newsletters and a whole bunch of premium podcasts. To subscribe, head to the ken.com and click on the red subscribe button on the top of the Ken website. Today's episode was hosted and produced by my colleague Rachel Vargis and edited by Rajiv Sien.