SIP Risk Factors

What are SIPs (Systematic Investment Plans)?

Systematic Investment Plans (SIPs) are a disciplined method of investing, allowing individuals to invest small, fixed amounts of money regularly in mutual funds or market-linked funds. Instead of making a lump-sum investment, SIPs enable investors to contribute at periodic intervals, such as weekly, monthly, or quarterly.

Risk Factors Involved in SIPs

Below are the mutual fund SIP investment risks:

1. Market Risk and Volatility

   The biggest risk with SIPs lies in market fluctuations. Since mutual funds invest in equity or debt instruments that are sensitive to market conditions, the value of your investment can go up or down. A market downturn can temporarily reduce your portfolio value, especially in short-term horizons. Unlike fixed deposits, SIPs do not guarantee returns. Patience is key to riding out volatile phases.

2. Fund Performance Risk

   Your SIP returns depend heavily on how well the specific mutual fund or stock performs. Even in a growing market, an underperforming fund managed by an inefficient team or burdened with poor stock choices can deliver disappointing returns. Choosing funds with a solid track record, consistent performance, and an experienced fund manager can help mitigate this risk.

3. Credit Risk

   For SIPs in debt funds or hybrid funds, credit risk plays a significant role. This is the possibility that issuers of bonds or other debt instruments might fail to repay interest or principal. Such defaults can drag down the net asset value (NAV) of the fund, affecting your investment. Investors should prefer funds that invest in high-quality, well-rated securities to lower this risk.

4. Interest Rate Risk

   Debt funds are sensitive to changes in interest rates. When interest rates rise, bond prices typically fall, negatively impacting the returns of debt-oriented SIPs. Conversely, when rates fall, bond values rise. Understanding this inverse relationship helps investors set realistic expectations from debt mutual funds, especially during periods of economic transition.

5. Liquidity Risk

   While most mutual funds offer good liquidity, not all allow easy withdrawals. Some categories, like Equity-Linked Savings Schemes (ELSS), come with a mandatory three-year lock-in period. Others may levy exit loads if you redeem units before a certain period. Investors should check fund terms carefully to avoid any liquidity constraints when they need funds urgently.

6. Inflation Risk

   Even if an SIP generates positive returns, those earnings might lose value if inflation outpaces them. Over time, inflation erodes purchasing power, meaning the real (inflation-adjusted) returns could be lower than expected. This makes equity SIPs preferable for long-term goals, as equities have a better potential to beat inflation compared to fixed-income investments.

7. Concentration Risk

   Putting all your SIPs into one theme, sector, or fund increases vulnerability. If that particular segment underperforms, your overall returns will suffer. Diversification across asset classes, market caps, and fund types helps balance out risk and stabilise returns over time.

8. Behavioural Risk

   Perhaps the most overlooked factor is investor behavior. Emotional reactions to market volatility, such as pausing SIPs during downturns or redeeming units in panic, can undermine long-term wealth creation potential. Staying invested and continuing SIP contributions allows investors to benefit from rupee cost averaging and market recovery phases.

Best SIP Plans With Low Risk

Details of the Best SIP Plans with Low Risk Factor 

Below are the details of the best SIP plans that you can consider if you want to choose low-risk options: 

1. Invesco India Arbitrage Fund-Growth

   The scheme aims to generate income by mainly exploiting arbitrage opportunities between the cash and derivatives markets, with the remaining portfolio in debt and money market instruments.

   Parameters	Details
   Fund Name	Invesco India Arbitrage Fund Regular-Growth
   NAV	₹ 32.69 (as on 5th December, 2025)
   AUM	₹24,204.72 Crs
   Expense Ratio	1.06%
   Return 5 Years	5.85%
   Minimum Investment	SIP ₹1000 & Lumpsum ₹1,000
   Risk Level	Principal at low risk
   Launch Date	30th April, 2007
   Asset Allocation	Equity: -0.47%, Debt: 18.42%, Others: 81.93%
   Top Sectors	NA
   Top Holdings	Net Receivables Invesco India Liquid Fund Direct-Growth Invesco India Credit Opportunities Fund Direct-Growth ICICI Bank Ltd Reliance Industries Ltd HDFC Bank Ltd Zomato Ltd Repo Tata Consultancy Services Ltd Axis Bank Ltd
   Fund Managers	Manish Kalani Deepak Gupta
   Fund Type	Open-ended

2. ICICI Prudential Equity Arbitrage-Growth

   The scheme aims to generate low‑volatility returns by using arbitrage and other derivative strategies in equity markets, along with investments in debt and money market instruments.

   Parameters	Details
   Fund Name	ICICI Prudential Equity Arbitrage-Growth
   NAV	₹ 35.13 (as on 5th December, 2025)
   AUM	₹31,526.24 Crs
   Expense Ratio	0.95%
   Return 5 Years	5.7%
   Minimum Investment	SIP ₹1000 & Lumpsum ₹5,000
   Risk Level	Principal at low risk
   Launch Date	30th December, 2006
   Asset Allocation	Equity: -0.44%, Debt: 18.99%, Others: 81.45%
   Top Sectors	NA
   Top Holdings	Cash Margin ICICI Prudential Money Market Direct-Growth HDFC Bank Ltd Reliance Industries Ltd Bharti Airtel Ltd Repo Mahindra & Mahindra Ltd Tata Consultancy Services Ltd ITC Ltd Axis Bank Ltd
   Fund Managers	Kayzad Eghlim Nikhil Kabra Sharmila D'Silva Darshil Dedhia Archana Nair Ajay Kumar Solanki
   Fund Type	Open-ended

3. Bank of India Overnight Fund Regular-Growth

   The scheme aims to generate income commensurate with low risk and high liquidity by investing in overnight securities having a residual maturity of one business day.

   Parameters	Details
   Fund Name	Bank of India Overnight Fund Regular-Growth
   NAV	₹ 1,341.75 (as on 5th December, 2025)
   AUM	₹83.84 Crs
   Expense Ratio	0.1%
   Return 5 Years	5.35%
   Minimum Investment	SIP ₹1000 & Lumpsum ₹5,000
   Risk Level	Principal at low risk
   Launch Date	28th January, 2020
   Asset Allocation	Others: 100%
   Top Sectors	NA
   Top Holdings	Repo Net Receivables
   Fund Managers	NA
   Fund Type	Open-ended

   
   
   

4. PGIM India Liquid Fund-Growth

   The scheme aims to generate steady returns with high liquidity by investing in a portfolio of short‑term, high‑quality money market and debt instruments.

   Parameters	Details
   Fund Name	PGIM India Liquid Fund-Growth
   NAV	₹ 348.39 (as on 5th December, 2025)
   AUM	₹512.79 Crs
   Expense Ratio	0.22%
   Return 5 Years	5.64%
   Minimum Investment	SIP ₹1000 & Lumpsum ₹5,000
   Risk Level	Principal at low to moderate risk
   Launch Date	5th September, 2007
   Asset Allocation	Debt: 99.46%, Others: 0.54%
   Top Sectors	NA
   Top Holdings	HDFC BANK LIMITED CD 04DEC25 CANARA BANK CD 22DEC25 SBI CARDS AND PAYMENT SERVICES LIMITED 145D CP 08DEC25 HDFC BANK LIMITED CD 19SEP25 SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA SR VII 7.47 BD 25NV25 FVRS10LAC GOVERNMENT OF INDIA 36210 091 DAYS TBILL 16OT25 FV RS 100 GOVERNMENT OF INDIA 35341 364 DAYS TBILL 11DC25 FV RS 100 Others CBLO GOVERNMENT OF INDIA 36426 091 DAYS TBILL 11DC25 FV RS 100 GOVERNMENT OF INDIA 36252 091 DAYS TBILL 30OT25 FV RS 100
   Fund Managers	Puneet Pal Bhupesh Kalyani
   Fund Type	Open-ended

5. Canara Robeco Liquid Regular Plan-Growth

   The scheme aims at enhancement of income while maintaining a high level of liquidity through investment in a mix of money market instruments and debt securities.

   Parameters	Details
   Fund Name	Canara Robeco Liquid Regular Plan-Growth
   NAV	₹ 3,221.10 (as on 5th December, 2025)
   AUM	₹6,576.69 Crs
   Expense Ratio	0.2%
   Return 5 Years	5.67%
   Minimum Investment	SIP ₹1000 & Lumpsum ₹5,000
   Risk Level	Principal at low to moderate risk
   Launch Date	14th July, 2008
   Asset Allocation	Debt: 96.03%, Others: 3.97%
   Top Sectors	NA
   Top Holdings	GOVERNMENT OF INDIA 36571 091 DAYS TBILL 02JN26 FV RS 100 GOVERNMENT OF INDIA 35753 182 DAYS TBILL 25SP25 FV RS 100 UNION BANK OF INDIA CD 22DEC25 Repo EXPORT IMPORT BANK OF INDIA 91D CP 12DEC25 ICICI SECURITIES LIMITED 91D CP 10DEC25 RELIANCE RETAIL VENTURES LIMITED 86D CP 14AUG25 INDIAN OIL CORPORATION LIMITED 91D CP 03DEC25 INDIAN OIL CORPORATION LIMITED 91D CP 19DEC25 TATA CAPITAL LIMITED 91D CP 18DEC25
   Fund Managers	Avnish Jain Kunal Jain
   Fund Type	Open-ended

6. Kotak Debt Hybrid Fund Regular-Growth

   The scheme seeks to enhance returns over a portfolio of debt instruments with a moderate exposure to equity and equity‑related instruments, aiming to generate regular returns from debt and additional return potential from equities.

   Parameters	Details
   Fund Name	Kotak Debt Hybrid Fund Regular-Growth
   NAV	₹ 59.43 (as on 5th December, 2025)
   AUM	₹3,130.30 Crs
   Expense Ratio	1.66%
   Return 5 Years	10.88%
   Minimum Investment	SIP ₹1000 & Lumpsum ₹100
   Risk Level	Principal at moderately high risk
   Launch Date	2nd December, 2003
   Asset Allocation	Equity: 22.69%, Debt: 70.36%, Others: 6.9%
   Top Sectors	Consumer Discretionary Industrials Consumer Staples Energy & Utilities Financial Healthcare Materials Real Estate Technology
   Top Holdings	GOVERNMENT OF INDIA 34238 GOI 22AP64 7.34 FV RS 100 GOVERNMENT OF INDIA 33071 GOI 19JU53 7.3 FV RS 100 GOVERNMENT OF INDIA 35840 GOI 15AP65 6.9 FV RS 100 Repo GOVERNMENT OF INDIA 34733 GOI 05AG54 7.09 FV RS 100 NATIONAL HOUSING BANK 6.80 BD 02AP32 FVRS1LAC 7.09% GOI MAT 25 Nov 2074 BHARTI TELECOM LIMITED SR XIX 8.65 NCD 05NV27 FVRS1LAC JTPM METAL TRADERS LIMITED NCD 30AP30 FVRS1LAC STATE DEVELOPMENT LOAN 36359 RAJ 28AG35 7.49 FV RS 100
   Fund Managers	Abhishek Bisen Shibani Sircar Kurian
   Fund Type	Open-ended

7. HDFC Hybrid Debt Fund Regular-Growth

   The primary objective is to generate regular income by investing mainly in debt and money market instruments, with a secondary objective of long‑term capital appreciation through moderate exposure to equity and equity‑related instruments.

   Parameters	Details
   Fund Name	HDFC Hybrid Debt Fund Regular-Growth
   NAV	₹ 83.65 (as on 6th December, 2025)
   AUM	₹3,387.60 Crs
   Expense Ratio	1.74%
   Return 5 Years	11.27%
   Minimum Investment	SIP ₹1000 & Lumpsum ₹100
   Risk Level	Principal at moderately high risk
   Launch Date	26th December, 2003
   Asset Allocation	Equity: 20.54%, Debt: 75.74%, Others: 2.99%
   Top Sectors	Consumer Discretionary Industrials Consumer Staples Energy & Utilities Financial Healthcare Materials Technology
   Top Holdings	GOVERNMENT OF INDIA 34238 GOI 22AP64 7.34 FV RS 100 GOVERNMENT OF INDIA 34733 GOI 05AG54 7.09 FV RS 100 GOI Sec 7.23 15/04/2039 GOVERNMENT OF INDIA 33071 GOI 19JU53 7.3 FV RS 100 INDIAN RAILWAY FINANCE CORPORATION LIMITED SERIES 134 8.30 LOA 25MR29 FVRS10LAC GOVERNMENT OF INDIA 35943 GOI 05MY35 6.33 FV RS 100 Net Current Assets ICICI Bank Ltd GOI Sec 7.18 24/07/2037 GOVERNMENT OF INDIA 35031 GOI 07OT34 6.79 FV RS 100
   Fund Managers	Shobhit Mehrotra Srinivasan Ramamurthy Dhruv Muchhal
   Fund Type	Open-ended

Strategies to Mitigate SIP Risks

Below are the strategies to mitigate mutual funds SIP investment risk:

• Diversify across funds, sectors, and asset classes.
• Stay invested for the long term, ideally seven years or more for equity SIPs.
• Review your portfolio regularly to ensure it aligns with your goals and risk appetite.
• Stay disciplined and invest consistently, avoiding market timing.

Benefits of Systematic Investment Plans (SIPs)

Below are the benefits of SIPs: 

1. Disciplined Investment Habit

   SIPs encourage consistent saving by automating regular investments, fostering financial discipline over time.

2. Rupee Cost Averaging

   Investing at regular intervals ensures you purchase more units when prices are low and fewer when prices are high, averaging the overall cost and reducing the impact of market volatility.

3. Power of Compounding

   Small, regular investments grow significantly over time due to the power of compounding, where your earnings generate further earnings.

4. Affordability

   SIPs allow you to start investing with small amounts, such as ₹100 or ₹500 per month, making it accessible to investors with limited funds.

5. Flexibility

   You can increase, decrease, or stop your SIP at any time without incurring significant penalties, giving you control over your investments.

6. Convenience

   Automated payments make SIPs hassle-free, as the investment amount is directly debited from your bank account.

7. Goal-Based Investing

   SIPs can be tailored to specific financial goals, such as buying a home, funding education, or retirement planning.

8. No Need for Market Timing

   SIPs eliminate the need to time the market, as regular investments balance out price fluctuations over time.

9. Tax Benefits (ELSS Funds)

   If you invest in tax-saving mutual funds (ELSS) through SIPs, you can claim deductions under Section 80C of the Income Tax Act.

SIP Calculator

I know my investment amount I know my goal amount

Monthly SIP Yearly SIP Lumpsum

I want to invest Pro Tip

Financial experts suggest that a person should invest 10-15% of their monthly income for long-term financial growth

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I want to invest for Pro Tip

Financial experts suggest that individuals should ideally invest for a period of 5 to 10 years, or even longer, to maximize the benefits of compounding and navigate market fluctuations effectively

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Expected return Pro Tip

Top 25% of investors consistently generate more than 12% return

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Total Wealth ₹1.03 Cr

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I want to save

I want to invest for Pro Tip

Financial experts suggest that individuals should ideally invest for a period of 5 to 10 years, or even longer, to maximize the benefits of compounding and navigate market fluctuations effectively

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Expected return Pro Tip

Top 25% of investors consistently generate more than 12% return

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Monthly Investment ₹22.4 L

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Top Funds with High Returns (Past 7 Years)

13.18%

Equity Pension

15.49%

Global Equity Index Funds Strategy

19.07%

High Growth Fund

13.4%

Opportunities Fund

21.09%

Multi Cap Fund

14.39%

Accelerator Mid-Cap Fund II

15.84%

Multiplier

14.73%

Frontline Equity Fund

18.41%

Pension Mid Cap Fund

11.46%

Growth Plus Fund

14.82%

US Equity Fund

15.19%

Growth Opportunities Plus Fund

11.84%

Equity Top 250 Fund

14.24%

Future Apex Fund

12.17%

Pension Dynamic Equity Fund

14.64%

Pension Enhanced Equity

Is SIP Investment Safe?

SIPs can be considered a safe investment option because of the following reasons: 

1. Disciplined Approach

   SIPs promote regular investments, which can mitigate the risk of impulsive or poorly timed market entries and exits.

2. Rupee Cost Averaging

   By investing consistently across market highs and lows, SIPs reduce the impact of market volatility, averaging your purchase cost over time.

3. Diversification

   Investing through SIPs in mutual funds provides exposure to a diversified portfolio of stocks, bonds, or other assets, reducing the impact of individual asset underperformance.

4. Long-Term Benefits

   SIPs are designed for long-term wealth creation. Historical trends show that staying invested for a longer horizon often yields better returns, despite short-term market fluctuations.

Who Should Consider Investing in SIPs?

Here’s a look at who should consider SIPs and why:

1. New Investors

   • Why: SIPs allow beginners to start small, offering a low-risk entry into the world of investing.
   • Benefits: Ease of investing, no need to time the market, and gradual exposure to market-linked instruments.

2. Salaried Professionals

   • Why: With a steady income, salaried individuals can set aside a fixed amount monthly for SIPs to build wealth over time.
   • Benefits: Encourages disciplined saving and helps achieve financial goals like buying a home, education, or retirement.

3. Individuals with Long-Term Goals

   • Why: SIPs are ideal for long-term financial planning, such as building a retirement corpus, funding children’s education, or planning a dream vacation.
   • Benefits: Leverages the power of compounding and rupee cost averaging over time.

4. Risk-Averse Investors

   • Why: SIPs offer a safer way to navigate market volatility compared to lump-sum investments, reducing the emotional stress of market timing.
   • Benefits: Diversified mutual fund options allow investors to choose funds that align with their risk tolerance.

5. Busy Professionals

   • Why: For individuals with limited time to actively monitor markets, SIPs automate the investment process.
   • Benefits: Hassle-free investing with regular contributions deducted automatically from bank accounts.

6. Parents Planning for Children’s Future

   • Why: SIPs help parents accumulate a significant corpus for education, marriage, or other milestones.
   • Benefits: Long-term compounding ensures steady growth for future needs.

7. Young Professionals

   • Why: Starting early allows young earners to take advantage of longer investment horizons.
   • Benefits: Small, consistent contributions can grow into substantial wealth over decades.

8. People Seeking Tax Benefits

   • Why: Investing in SIPs through tax-saving mutual funds like ELSS (Equity Linked Savings Schemes) provides tax deductions under Section 80C.
   • Benefits: Reduces taxable income while building wealth.

9. Investors Looking for Flexibility

   • Why: SIPs allow for modifications like increasing or stopping contributions, aligning with financial changes.
   • Benefits: Offers control and adaptability without penalties.

Conclusion 

While SIPs come with certain risks, such as market volatility, credit risks, and inflationary pressures, these can be mitigated through proper planning and diversification. By understanding and addressing the risks involved, investors can harness the potential of SIPs to achieve consistent growth and meet their financial objectives.