SIP In NEPAL: A Smart Strategy or a Structured Illusion?

“If SIP is truly that powerful, why are most people who promote it just selling it—rather than growing rich from it themselves?”

Systematic Investment Plans (SIPs) are frequently promoted as one of the most intelligent methods for accumulating long-term wealth. They offer the advantages of disciplined investing, reduced risk, and the benefits of compounding — presenting themselves as an ideal financial strategy for average investors.

As of now, 7 open‑ended mutual funds in Nepal offer SIP options, including:

1. NIBL Sahabhagita Fund (NIBLSF)
2. Siddhartha Systematic Investment Scheme (SSIS)
3. NMB Saral Bachat Fund‑E (NMBSBE)
4. NIC Asia Dynamic Debt Fund (NADDF)
5. Kumari Sunaulo Lagani Yojana
6. Subha Laxmi Kosh
7. Nabil Flexi Cap Fund

But is SIP truly a smart strategy, or just a well-packaged financial trap? In Nepal, the reality is more complex — and in many cases, concerning.

Lets discuss in detail:-

1. Promise vs. Performance

SIPs in Nepal are marketed with the promise of achieving "financial freedom" through consistent, small investments. Nevertheless, numerous investors have discovered that the actual returns seldom align with their expectations. In a fluctuating and underdeveloped market such as NEPSE, mutual funds linked to SIPs frequently underperform, particularly in comparison to direct investments. Although SIPs claim to offer stable returns, the actual outcomes are often disheartening. It might appear "intelligent," but when the anticipated returns fail to materialize, the strategy begins to resemble a trap.

2. Lack of Transparency

A fundamental issue with SIPs is the absence of transparency in fund management. Investors frequently remain unaware of:

 Where their funds are allocated?
 The management fees they incur?
 The reasons behind their fund's poor performance?

In the absence of transparent communication or consistent accountability from fund managers, investors find themselves uninformed. They continue to invest without insight, anticipating outcomes that fail to
materialize. Consequently, what is promoted as "trust-based investing" increasingly resembles mere blind gambling.

3. Deceptive Marketing practices and Agents

SIPs are marketed aggressively in Nepal, typically through commission- driven agents through social media as;- youtube,instagram and many others who prioritize their sales goals over your financial well-being.

These agents often:
 Guarantee returns
 Minimize or conceal risks
 Promote SIPs as superior to fixed deposits without providing adequate explanations.

This results in a sales-oriented environment where financial literacy is overlooked, leading investors to purchase products they do not completely comprehend. While it may not be a blatant scam, these sales techniques undoubtedly come across as manipulative.

For instance:- The message usually goes like this: “Start with just Rs. 1000 monthly and become a millionaire.” While SIPs can be part of a long-term plan, these claims are often exaggerated. Most of these promotions ignore important factors like market volatility, lack of liquidity, and poor fund management.

4. Hidden Costs Eat Returns

Although SIP is promoted as a form of "low-cost investing," the truth is that many SIP funds in Nepal incur management fees, service charges, and taxes that diminish overall returns. These expenses are frequently
hidden from average investors and seldom mentioned by agents or firms. Ultimately, a significant portion of your earnings could end up benefiting someone else rather than you.

5. Poor Regulation = Poor Protection

Nepal's mutual fund sector is characterized by insufficient regulation and inadequate protection for investors. In the event of a fund's failure or if a manager misappropriates investor funds, the average individual has limited recourse. Although SEBON's regulatory oversight is on the rise, investors continue to face systemic risks. You are participating in a system where a "smart strategy" can swiftly transform into an unnoticed loss.

Conclusion: Smart Strategy or Hidden Trap?

Although SIPs seem appealing at first glance, particularly in theory, their sales and management practices in Nepal render them risky — potentially even predatory — for the average investor. In the absence of transparency, regulation, or education, SIPs can shift from being a genuine "strategy" to a mere structured illusion, favoring companies and agents over the individuals who are investing.

So, is SIP a scam? Maybe not directly. But in Nepal, the way it’s being used certainly makes it feel like one. 

Article By: Suraj Agrawal (Research Analyst)