SIP & Market Volatility
Should You Stop SIP During Market Volatility or Low Returns? Here's Why Not
When markets fall or your SIP shows negative returns, it is natural to feel worried and think about stopping your SIP. But for long-term wealth creation, this is often the worst time to stop. This article explains, in simple language, why continuing your SIP through volatility usually works better than reacting emotionally.
Why Do People Feel Like Stopping SIP During Volatile or Low-Return Phases?
Most SIP decisions are taken logically, but most SIP cancellations are done emotionally. When markets fall or returns look negative, investors start doubting the SIP decision itself, instead of questioning the market cycle or time horizon.
Common Thoughts During Volatility
- • “My SIP is in loss, maybe this fund is wrong.”
- • “Markets are falling every week, better to stop now.”
- • “I will restart SIP when markets become stable.”
- • “What if this time recovery does not happen?”
Behavioural Biases Behind These Thoughts
- • Loss Aversion – pain of loss feels more than joy of gain.
- • Recency Bias – recent 6–12 month returns look bad, so future is assumed to be bad.
- • Herd Behaviour – stopping SIPs because friends or colleagues also stopped.
- • Overconfidence – belief that you can “time” a better entry point later.
Emotion-driven decisions may give short-term comfort, but they usually hurt long-term wealth creation. A disciplined SIP is designed to work through volatility, not in the absence of it.
Story: Two Friends, Same SIP – Different Decisions in a Crash
Consider two friends, Raj and Meera. Both started a ₹5,000 monthly SIP in a diversified equity mutual fund in January 2018, planning to invest for 15+ years.
Raj: Stopped SIP During Market Fall
- • Continued SIP from 2018 to early 2020.
- • When markets corrected sharply, his SIP showed negative returns.
- • He panicked, stopped SIP, and decided to wait “till markets become stable”.
- • He restarted SIP only after markets recovered and returns again looked good.
Meera: Continued SIP Calmly
- • She continued the same ₹5,000 SIP every month, even in negative months.
- • During the fall, her SIP bought more units at lower NAVs.
- • She did not try to time the market, only followed her 15-year goal.
- • When recovery came, her larger units multiplied, boosting her overall returns.
Result after a few years (illustrative, assuming similar fund performance):
| Investor | SIP Behaviour | Approx. Units Accumulated* | Corpus After Recovery* |
|---|---|---|---|
| Raj | Stopped SIP during fall | Lower – fewer units bought at low NAV | Smaller corpus than Meera |
| Meera | Continued SIP throughout | Higher – more units at low NAV | Higher corpus due to rupee-cost averaging |
*Figures are indicative to explain the concept. Actual numbers depend on scheme, market movement and time period. Mutual fund investments are subject to market risks.
In most market cycles, the disciplined investor who continues SIP through falls ends up with more wealth than the investor who stops and restarts based on fear or headlines.
What Actually Happens If You Stop SIP During a Bad Phase?
Let us look at a simplified comparison for a long-term investor who faces a 1–2 year period of low or negative returns.
| Scenario | Short-Term Feeling | What You Lose | Long-Term Impact |
|---|---|---|---|
| You stop SIP during 12–18 months of volatility | Emotional relief – “I stopped losing more money” | Missed chance to buy more units at low NAV; break in discipline | Smaller corpus at goal year; weaker compounding |
| You continue SIP calmly during the same period | Temporary discomfort seeing negative or flat returns | You keep buying systematically, even when prices look unattractive | Higher units accumulated; stronger recovery and better long-term wealth |
SIPs are designed for 10–20 year goals. Judging them based on 6–18 months of volatility is like judging a Test match based only on the first few overs.
Is It Ever Right to Pause or Change SIP? Yes – But for the Right Reasons
Continuing SIP blindly is not the message. The message is: do not stop SIP only because markets are volatile or short-term returns are low. SIP changes should be based on life situation, goals and asset allocation – not headlines.
Situations Where Reviewing / Adjusting SIP Makes Sense
- • Major change in income or job stability.
- • You are very close to the goal (1–2 years left) – need to shift gradually to safer assets.
- • Your asset allocation is too aggressive for your risk profile.
- • Fund quality issue – very poor long-term track record versus peers and benchmark.
Situations Where Stopping SIP is Usually a Mistake
- • Markets corrected in last 6–12 months and SIP shows temporary loss.
- • Negative news flow and scary headlines on TV / social media.
- • Friends or colleagues stopped SIPs and you are copying them.
- • You are trying to time re-entry later at “lower levels”.
Instead of cancelling SIP in panic, it is usually better to review your portfolio with a mutual fund expert and make planned changes, if required.
Common Questions from SIP Investors
For long-term equity SIPs, a 3–4 year period that includes a market correction can show flat or even negative returns. That does not mean the SIP has failed. Equity wealth creation typically needs 7–10+ years.
Instead of stopping, review: Are your goals long term? Is the fund category appropriate? If yes, staying the course and increasing SIP as income rises can be far more rewarding than exiting in disappointment.
All-time highs have been broken again and again in the past. Long-term charts of equity markets show many new highs and many temporary corrections in between. SIP is specifically designed so that you do not need to guess tops and bottoms.
Pausing at highs and restarting later often leads to missed participation in further upside. A disciplined SIP, aligned to goals and risk profile, is usually more effective than trying to outsmart the market.
This is a more constructive thought. Instead of stopping SIP fully, it can make sense to adjust asset allocation between equity and debt based on your risk tolerance, time horizon and goals.
A mutual fund expert can help you decide the right mix of equity and debt SIPs so that you can stay invested comfortably for the long term without panic reactions.
If you want to go deeper into concepts around SIP, volatility and wealth creation, you may like these detailed articles:
Don't Let Short-Term Volatility Derail Your Long-Term SIP Journey
SIP is a powerful tool for building wealth over 10–20 years. Market volatility and temporary low returns are a normal part of that journey, not a signal to abandon it. With the right asset allocation, fund selection and guidance, you can stay disciplined and use volatility to your advantage.
Disclaimer
The scenarios, stories and examples in this article are illustrative in nature and for educational purposes only. They are not based on any specific scheme or guaranteed outcome.
Mutual fund investments are subject to market risks. Read all scheme-related documents carefully before investing. Past performance may or may not be sustained in the future and does not guarantee any returns.
The information provided here should not be treated as investment advice or a recommendation to buy, sell or hold any investment product. Please assess your risks and consult a qualified professional or mutual fund expert before making investment decisions.
HRP WEALTH | 9327141436 | hrpwealth@gmail.com | AMFI Registered Mutual Fund Distributor (ARN-342284) | IRDA Authorized Insurance Consultant | Not a SEBI-registered Investment Adviser
