Everywhere you look today, including my status, you will hear about SIP or the Systematic Investment Plan. It is a simplest way of investing a set amount in mutual funds every year. You set an amount, pick some funds according to your goals, and bam, your investment is sorted. And it works really well for salaried individuals too. It builds discipline in a world no short of temptations. But what if you are an entrepreneur? Whta if you are in those dreaded industries with very long cash conversion cycles? How do you know if you will have enough money on 7th of every month for 50,000 SIP that you want to do?
There is an alternative to it. You can start small. If your plan says that you need an SIP of 50,000 per month, set one for 5,000 or 10,000. An amount that should be relatively easy for you to manage. And keep a mental (or digital) track of how much lead or lag is there in your investments. Let me give you an example. You have money at hand now, so you add 80,000 to your mutual funds portfolio in January 2026. SIP in Jan adds another 10,000. Your payments are stuck in February so you do not add anything other than the SIP. Same situation continues till first week of May. You have contributed 80,000 + 50,000 = 1,30,000 from 5 installments of SIPs by then. In the second week of May your payments are cleared and you are in a position to invest again. Theoretically, you should have invested 2,50,000 by May. But you are 1,20,000 short of it. So you invest 1,20,000 in one go.
In the above example you have not committed to a large fixed cash outflow. But with proper discipline you have invested the same amount you would have through a higher SIP. I often get asked the difference of returns between fixed SIP and occassional lumpsum investmetments. There have been studies which show that returns from a monthly SIP and a yearly SIP are not materially different unless you manage to tap all the market high points exactly. If that is the case, we shouldn’t be worrying too much about timing the market. Our entire focus should be to hit our investment target year after year so that we can build a portfolio of your dreams!