Instead of a mutual fund SIP can I invest on my own each month?

Published: August 26, 2020 at 11:18 am

Let us consider this question asked by a reader: “Instead of starting a mutual fund SIP, can I invest small amounts on my own each month?” The answer might seem trivial to old investors, but it worth clarifying for the sake of newbies.

If you ask this question to any AMC person or mutual fund sales guy they would immediately say, “no, a SIP is the best to inculcate discipline and invest regularly”. The reason they say this should be obvious. They know that retail investors do not or cannot invest much. So they want the next best thing: gently coerce investors to set up a regular commission and profit stream for themselves.

Don’t get me wrong. There is nothing wrong with a SIP or an automated way to buy units each month. The point I would like to make here is, there is nothing wrong with buying units on our own each month either. In fact, contrary to what the “experts” would say, manual investing has behavioural benefits considering the ways SIPs are sold.

First, let us get some childish notions out of the way. Manual investing or automated investing, there is no benefit in terms of return or risk. Either way, for blind regular investing, the returns we get simply depends on the market level at the time of checking. See: What I learnt from an 11-year SIP in a midcap fund.

Second, whenever I say, setting up a SIP is not necessary, investors ask, “Then when should I invest?”. It does not matter – 1st of the month or the month or 28th. Just invest when you can. See: What is the best date to start a mutual fund SIP? Results from 4000+ 10 Year SIP Returns!


Those who have a spending problem could invest early. If you think a SIP will solve a spending problem think again – a SIP can be stopped in a couple of clicks and it is not the SIP that matters but the amount invested!

Naturally, manual investing will lead to a new set of questions: should I wait for mini-dips and then invest? Again it does not matter as long as you do invest each month. It is a rite of passage, part of an investor’s natural evolution.  As long as one does not assume one way of investing is superior to another, anything goes.

So the answer to “Instead of a mutual fund SIP can I invest on my own each month?” is, yes, you can. There is no difference between the two as long as it is done regularly and consistently. Automated or manual, all you are doing is accumulate mutual fund units.

Investors who appreciate goal-based investing and the need for systematic risk management also tend to appreciate manual investing or at the very least recognise that it is just the same as a SIP.

I would recommend manual investing to those who understand the basics of portfolio construction as it gives them a ‘hands-on’ feel to the problem rather than a ‘invest and forget’ approach the AMC folk would like to you adopt.

The new investor tends to think of the SIP as a contract like an insurance policy and often assumes the AMC could levy a penalty of missing payments. The first step to effective portfolio management, in particular portfolio rebalancing,  is to think in terms of mutual fund units.

We buy units in exchange for money and sell them back to the AMC if we need money both at current NAV. As simple as that. Invest manually or via SIP, withdraw manually or via SWP, switch from one scheme to another manually or via STP it is just a simple matter of unit exchange.

AMC folk do not care about your needs or appropriate asset allocation for those needs. They only want ‘all you can spare’ invested in their most expensive schemes automated by SIP.

Hard as it may be for many to accept, manual investing with a system in place is behaviourally beneficial. You can invest whenever you want, as much as you want or stop investing for a few months. Rebalance without worry etc.

If you are incapable of investing regularly on your own without automation then you are most certainly incapable of managing risk which cannot be automated as per your personal needs.  There is no escape from manual intervention.

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