Systematic Investment Plan Stoppages Increase Amid Market Volatility, Experts Emphasize Importance of Long-Term Investment Discipline

Market Volatility and Systematic Investment Plans (SIPs)

Key Takeaways

• In February, 65.72 lakh new SIP accounts were registered, while about 49.70 lakh were discontinued or matured, resulting in a SIP stoppage ratio of 76 percent.
• The stoppage ratio measures the number of SIPs discontinued or matured against new registrations in a month, with a ratio over 100 percent indicating that SIP stoppages outpaced new registrations.

Benefits of SIPs in Volatile Markets

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• SIPs allow investors to benefit from rupee cost averaging, accumulating more units when markets fall and fewer when prices rise.
• Market corrections provide opportunities for SIP investors to accumulate more units at a lower price, potentially improving long-term returns.
• Rupee cost averaging works particularly well when markets are volatile, moving sideways, or in a corrective phase.

How Rupee Cost Averaging Works

• SIPs involve investing a fixed amount into a mutual fund at regular intervals, typically every month.
• The amount and frequency remain constant, but the price at which you invest keeps changing with market movements.
• By investing consistently, you accumulate more units when prices are lower and fewer units when prices are higher, helping to average the overall cost of investment.

Market Data and Long-Term Returns

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• A FundsIndia Wealth Conversations Report shows that if an investor had put in Rs 10 lakh in the Nifty 50 TRI between 1999 and 2026, the investment would have grown to about Rs 3.05 crore, implying an annualised return of roughly 13.7 percent.
• Missing just a handful of the market's best-performing days can significantly reduce returns.

Staying Invested Matters

• For long-term investors, staying invested often matters more than trying to predict short-term market movements.
• Continuing SIPs and staying invested gives your money the opportunity to participate fully when markets bounce back.
• Experts recommend considering lump-sum investments during corrections, but not stopping SIPs when markets are weak.