SIP is an investment: Most investors believe that they are investing ‘in’ SIP, whereas, they are actually investing in mutual funds ‘through’ a method known as SIP.
Suitable only for small investors: There is no limit to the maximum amount of investment through SIP, with the minimum amount being Rs. 500.
Unsuitable during Bullish markets: SIPs work irrespective of the market conditions because of Rupee Cost Averaging.
Suitable only for Equity Funds: SIPs are suitable for all types of mutual funds- equity, debt, hybrid or ELSS.
Amount of SIP cannot be changed:SIP is the most flexible way of investing, where the investor can change the amount and frequency of investment if required.
SIP is better than Lump Sum: It is true in general but not always true for everyone. For e.g., a professional trader who is successful in timing the market might earn better through lump sum investment, rather than SIP.
SIP guarantees returns: Since mutual funds are linked to the markets, there is no guarantee of returns either through SIP or lump sum investment.
SIP cannot be stopped: There is complete freedom to stop SIP in a particular fund, without any charges being levied by the company.
Penalty on default: The Company does not impose any penalty on the investor if he defaults in the payment of the SIP.
Start date of SIP is used for taxation: Each investment through SIP is considered as fresh investment for tax
Units cannot be sold when SIP is running: This is not true. The investor can sell his units, except when there is a mandatory lock-in period.