1. SIPs are not a separate asset class like bank deposits, equity funds or debt funds, but are only a method or tool to invest in the asset class of your choice.
2. SIPs reduce the risk of capital losses in equity funds but don't eliminate it.
3. If you start an SIP at a market high and the market falls sharply after you began investing, you will lose capital even on an SIP investment.
4. Research has shown that it is only on SIPs that run on for four years or more that capital losses were a rare possibility.
5. However, this is a function of how equity markets in India have behaved because bear markets in the last two decades have never lasted for more than four years.
6. Hence, SIPs too never made losses if continued for over four years.
7. Therefore, while investing in SIPs be aware that you still take on the risks of the asset class you are choosing.
8. If you are doing SIPs in large-cap equity funds, there's some risk of a capital loss.
9. If the SIP is in mid- or small-cap funds, the risk of that loss is higher.
10. If you are running an SIP directly in stocks, there's an even higher probability of losses.