By allowing investors to set aside a fixed sum at regular intervals, systematic investment plans (SIPs) ease the burden of making a large lump-sum investment while encouraging the discipline of saving first and spending later.
Owing to their popularity, SIPs have entered everyday financial vocabulary. So much so that fintech platforms such as IndiaBonds, Grip Invest and Wint Wealth now advertise "bond SIPs" to encourage investors to buy bonds.
But is this really an SIP, or simply staggered investing? The distinction matters because it determines how investors should use this convenience to their advantage.
How it works
In an equity or debt mutual fund SIP, even ₹100 buys you a slice of a professionally managed portfolio of stocks or bonds. A bond SIP, however, purchases one bond from one issuer each month.
The SIP facility simply automates the investment date while outsourcing the choice of that month's bond to the platform.
According to Vishal Goenka, co-founder of IndiaBonds, which launched its bond SIP two months ago, this promotes disciplined investing and gradual portfolio diversification without requiring investors to time the market. The platform allows investments starting at ₹10,000.
Ajinkya Kulkarni, co-founder and CEO of Wint Wealth, said, "A common pattern we observed was that people wanted a new issuer every month to reduce concentration risk, which is why we started."
The process works like this: you set up an SIP, by choosing a monthly amount, instalment date and register your auto debit mandate. At this stage, you also need to select a ‘theme’ that matches your needs. The amount you choose is in multiples of ₹10,000 or ₹1 lakh depending on the theme you choose as those are minimum face value denominations.
Themes vary across platforms. Some are based on credit risk and expected yields, while others classify bonds by maturity.
For instance, IndiaBonds offers:
High yield SIP: Indicative yields of 10%-12% annually in A+ to BBB+ rated bonds.
Moderate yield SIP: Indicative yields of 7.5%-9.5% annually in AAA to AA-rated bonds.
The moderate-yield option starts at ₹1 lakh because higher-rated bonds are generally issued with a minimum denomination of ₹1 lakh, Goenka explained.
Before every instalment, IndiaBonds recommends a curated bond with details such as issuer, credit rating, yield and maturity. Investors can skip that month's purchase if they wish. If they proceed, the bond is credited to their demat account, while coupon payments flow directly to their linked bank account.
Wint Wealth follows a different approach. Investors choose the sequence of bonds at the time of setting up the SIP.
Kulkarni explained, "We want to free them from monthly decision-making, but we want their initial choice to be independent." Even so, the platform sends a monthly reminder with an option to stop the investment.
Key differences
A bond SIP differs fundamentally from a debt mutual fund.
In a debt fund, the fund manager decides which securities to buy and automatically reinvests coupon income, allowing returns to compound.
A bond SIP only recommends a bond for purchase. According to Goenka, the platform suggests only newly issued bonds with reasonable secondary-market liquidity.
Coupon payments from direct bonds are credited to the investor's bank account and taxed at the applicable income-tax slab rate.
Both IndiaBonds and Wint Wealth currently offer only listed bonds, which qualify for 12.5% long-term capital gains tax if sold after 12 months. Debt mutual funds purchased after April 2023 continue to be taxed at the investor's slab rate.
Because bond SIPs accumulate bonds bought at different yields over time, Joydeep Sen, an independent debt market expert, said the strategy can work particularly well during rising interest-rate cycles or across multiple rate cycles.
According to Kulkarni, they also plan on introducing other products in this space like a step-up SIP which will have a feature to re-invest the interest earned to help investors achieve compounding.
“Bond SIPs suit first-time fixed income investors and anyone looking at building a predictable flow of interest income alongside their EPF and FD allocations.” said Nishchay Nath, founder & CEO, BondScanner.
“However, investors aren't averaging out price swings, they are simply buying whatever yield is available each month, and when rates fall, the later instalments earn less than the earlier ones. If utilized properly, bond SIPs can serve as a discipline tool for building a portfolio, not a way to time interest rates.”
Mind the risks
Investors should clearly understand the risks before opting for a bond SIP.
A mutual fund SIP provides instant diversification from the first investment. A Bond SIP builds diversification gradually, one bond at a time. This means a default by an issuer in the early months can have a much greater impact.
According to Goenka, direct bonds are also generally less liquid than debt mutual funds, even though they may offer higher yields.
But higher yields often signal higher risk.
Even among bonds carrying the same credit rating, a higher yield usually reflects investors demanding additional compensation for greater perceived risk.
Although direct bond investing offers complete transparency—you know the issuer, coupon rate and maturity date—it also places greater responsibility on the investor.
"What matters more is whether the issuing company can actually repay the bond the platform has curated for you. That assessment is the investor's own responsibility, not something the platform does on their behalf," Sen said.
Shashank Udupa, a Sebi-registered research analyst, warned that a single unrated or low-rated non-convertible debenture (NCD), packaged as a monthly investment habit, could expose investors to concentrated credit risk without them fully realizing it.
Tanwir Alam, founder and CEO of Fincart Finvest, added, "An SIP alone doesn't reduce an asset class's underlying price volatility. If the asset performs poorly over the long term, an SIP can't compensate for weak fundamentals."
Debt fund or bond SIP?
According to Sen, the choice ultimately depends on the investor. "Mutual funds tend to stay conservative and don't go beyond 7-9% yields, since they have to be more cognisant of credit quality, making them a better option if investors want safety and liquidity," he said.
"But several investment-grade papers of good companies exist at meaningfully higher yields than that, and the difference can be worth capturing through direct bonds for an investor who understands the trade-off."
For most investors, a debt mutual fund aligned with their financial goal remains the simplest and most efficient way to invest in bonds. However, investors choosing bond SIPs should stay within their overall asset allocation.
Abhishek Kumar, founder and chief investment advisor at SahajMoney, said this route suits investors who can effectively act as their own fund managers by monitoring interest-rate cycles, issuer quality and exit opportunities.
"Match the duration of the SIP to your goal, and know your exit cost. If the money is needed within a couple of years, a bond SIP accumulating longer-tenor bonds isn't the right fit; a target maturity fund or duration fund does that job more precisely," Kumar said.
Vishal Dhawan, co-founder of Plan Ahead Wealth Advisors, added that a bond SIP works best for investors with either a sizeable monthly investment surplus or the ability to actively monitor both markets and their portfolios—not as a passive, set-and-forget strategy.
The SIP wrapper is an effective way to build investing discipline.
But, the underlying bonds still need to be evaluated on their own merits, the risks understood, and the growing allocation periodically reviewed to ensure it remains aligned with the investor's financial goals.