1. An oft-heard argument is that if SIPs work so well in mutual funds, they should work even better with direct equity, as stocks can earn multi-bagger returns which few equity funds can deliver.
2. In fact, many brokerages even offer daily or monthly stock SIPs to help average the buy price of your stocks.
3. However, when you accumulate a stock via SIP, you can end up owning too much of it in your portfolio if you don't keep a careful watch on the individual stock or sector weights, as it is harder to keep track of relative portfolio weights when you invest through SIPs as compared to lump-sum purchases.
4. SIPs, by nature, are designed to put your investment on auto pilot which may work reasonably well in a fund, where the fund manager takes care of your portfolio, but when you do a stock SIP, close monitoring of returns on your part is essential to avoid bets that backfire, as no stock is a perpetual 'buy' at any price and great buys at one point in time turn out to be avoidable just a few months later.
5. When you sign up for SIP in a mutual fund, you are buying into a professionally managed portfolio, where the identity of individual stocks can keep changing as the fund manager actively reshuffles his bets at different market levels based on the options available, but with a stock SIP, it would be up to you to ensure that the stocks that you're regularly buying are good acquisitions over time by keeping a close watch on both the company's performance and the sector's to ensure that accumulating it remains a good idea.