Is it wise to have a SIP in Debt Mutual Funds?


When you invest in mutual funds, there are several choices that you need to make. One of them is deciding to invest through lump sums or a Systematic Investment Plan (SIP). Lump sums refer to one-time investments, whereas a SIP allows you to invest fixed amounts at regular intervals in the same mutual fund.

While SIP is widely regarded as the best method for investing in equity mutual funds, many investors are skeptical about starting a SIP in debt funds. In this article, we will discuss whether it makes sense to start a SIP in debt mutual funds or not. Let’s get started.

Are SIPs best-suited for equity funds?

The SIP method allows an investor to average out their cost of investments through rupee cost averaging. They can benefit from the falling market by buying more units and, subsequently, earning higher returns when the markets start rising again. Hence, SIP is the best-suited method for investing in equity mutual funds, which are highly volatile.

The Net Asset Value (NAV) of an equity fund can rise and fall sharply, and therefore, it offers a good opportunity to investors to gain the benefit of rupee cost averaging.

What about the debt funds?

Debt mutual funds are not as volatile as equity funds. Their main objective is to offer capital preservation to the investors instead of generating high returns through greater risks. Hence, SIPs may not work as perfectly with them as they do with equity funds. But that doesn’t mean starting an SIP in debt mutual funds would be a bad idea.

Here’s how you can benefit by starting a SIP in a debt fund:

  • Disciplined investing for long-term financial goals

It’s better to invest in equity markets if you’re investing with a long investment horizon. However, if you don’t want to expose your investments to risks and volatility, starting an SIP in debt funds isn’t a bad idea either. It allows you to take a disciplined approach towards investing for your long-term financial goals.

  • An opportunity to invest small amounts

Not everyone can invest large lump sums. Salaried professionals usually have limited income, and hence, they generally prefer to invest small amounts every month. Starting an SIP in debt mutual funds can be a good idea for such investors.

  • Better returns than most fixed-income instruments

Historical trends have proven that even if you invest in debt mutual funds, you can earn better returns than most fixed-income instruments, such as fixed deposits, recurring deposits, etc. That is why it is better to start a SIP in debt funds rather than investing your money in these instruments.

  • An ideal way to plan for short-term goals

If you want to invest for a short-term goal, starting a SIP in a debt mutual fund could be a great idea. You will be able to save and invest a small portion of your income every month without running the risk of losing your hard-earned money.


A SIP in debt mutual funds would not be as effective as in equity funds. However, it isn’t a bad idea either to start a SIP in a debt fund as it enables you to make disciplined investments as per your investment horizon.

With Tata Capital Moneyfy App, you can start investing in mutual funds seamlessly. This app can help you invest through lump sums as well as SIPs.