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  • Rohit Musale, CFA

Why I Don't Invest in SIPs

I want to give you a different perspective, which very few people talk about, in the financial services industry.

Conventional financial wisdom is designed to funnel people into investing in SIPs.

I chose to step out of that funnel, and charted my own path.

I have achieved financial freedom in my life without investing in SIPs.

Here are some common questions I hear about SIPs in mutual funds:

  • I want to invest in SIP. What is the best one to invest in?

  • How to start an SIP?

  • When is the right time to start an SIP?

  • When is the right time to stop an SIP?

  • Should I invest in an SIP?

  • Is it worth investing in an SIP?

  • What are the benefits of an SIP?

The reason these questions keep coming up is because, the mutual fund industry has done a great job of marketing the concept of an SIP to the retail investor.

This ensures, the money keeps flowing in to the asset management industry.

This allows the industry to charge fees on those funds.

As long as that SIP money keeps rolling in, everyone in the mutual fund industry gets paid and is very happy.

The real question is:

Is the investor happy?

I cannot tell you how many times people have called me confessing they are really not making any money in an SIP.

I really don't know why people are not making money in an SIP.

All I can tell you is that, I do not invest in SIPs.

In this post, I want to give you my reasons not doing so.

I will also explain how I have purposefully avoided SIPs in life, because my goals and priorities are different.

I am not for or against an SIP.

All I am saying is that, I don't do it.

Here are seven reasons:

1) It's a bad deal.

To me, it's a bad deal.

I give my money to a fund manager, who stands to make money from fees, irrespective of whether I make money or not.

That is not acceptable to me.

2) It takes money out of my pocket.

An SIP takes money out of my pocket every single month.

I don't like money going out of my pocket regularly.

I want money coming into my pocket regularly.

To me, that is common sense.

To me, that is basic financial IQ.

3) It's heavily marketed to me.

An SIP is something that is heavily marketed to me, the retail investor.

My rule is this:

Anything that is aggressively marketed to me, is probably not good for me.

The marketer is obviously spending a lot of money to buy me as a customer.

I do not want to fall into that trap.

4) It tests my patience.

An SIP requires me to wait for 'N' number of years, for the compound interest to go into effect and generate wealth for me.

That to me is nonsense.

I want money now.

I want cashflow now.

I want passive income now.

The whole concept of delayed gratification is flawed.

Today, there are 19 year old millionaires.

The world has changed.

Why do people tell me to wait for 'N' number of years?

It's because, they themselves don't know how to make money.

5) It’s for the average guy.

An SIP is designed for the average investor, who knows nothing about the world of money.

This is like a rich guy creating a product for the poor guy.

The poor guy really doesn't know where his money is going.

And he shall never know he made a mistake until a number of years are over.

6) I don't want to buy when the markets are going up.

An SIP forces me to keep buying when the market is going up.

I am talking normal SIP, not flexi-SIP.

As far as I know, Warren Buffett, the richest guy in the world, stays away from the market, when it is going up.

If smart people like Mr. Buffett don't buy when the market is going up, why should I buy?

7) The markets can remain low for very long periods of time.

An SIP forces me to keep buying when the market is going down.

Well, some markets may stay down for a very long period of time.

The Japanese Nikkei was at 38,000 in 1990.

Even after 30 years, it still trades below that level.

30 years is like 1/3rd of a lifetime of a person, assuming he or she survives till 90.

As I said earlier, I am not for or against an SIP.

My goal was to achieve financial freedom.

For some people, retirement is financial freedom.

For me, I have a different definition of retirement and financial freedom.

I have already retired at age 37, because I am financially free.

And how do I define financial freedom?

Financial freedom is when your total monthly passive income either equals or exceeds your total monthly expense.

As long as that equation holds true in my life, I consider myself retired and financially free.

Here are some reasons, I wanted to be financially free and retire early.

  • I wanted to spend more time with my family.

  • I wanted to travel whenever I wanted to.

  • I don't like to be told what to do.

  • I hate reporting to a boss.

  • I wanted to do work that I was passionate about.

  • I wanted the freedom of time, money, and location.

  • I wanted to live my life on my own terms.

  • I wanted to serve as many people as I could.

I had realized that, an SIP is not the way to achieve financial freedom.

The only way to hit my goal of financial freedom, was through real and practical financial education.

To cut a long story short, I first read the book 'Rich Dad Poor Dad', written by Robert Kiyosaki back in 1999.

That's when my real financial education began.

After several failed attempts to attain my goal of financial freedom, I was finally able to do it in November 2020.

I retired at the age of 37.

So, my question to you is this:

Are you willing to challenge your own belief, that:

'I need to start an SIP to retire.'


Rohit Musale, CFA

28 December 2022


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