Insufficient funds: Inadequate balance in the investor’s bank account can lead to dishonouring of the cheque or ECS (electronic clearance service) instructions.
Averaged Returns: Since SIP averages cost, it also averages the returns earned by investors.
Difficult returns calculation: Investments are made at different prices each month. Therefore, it does not make much sense to use the standard profit formula. Investors might have to use difficult formulas to evaluate returns.
Fixed Amount: The investor can invest only a fixed amount, irrespective of the market conditions or his own financial position.
Suitability: SIP is unsuitable for people with unpredictable cash flows, as they might face difficulty in committing a fixed amount each month.
