3 weeks ago

Stopping SIPs early hurts returns; staying invested long-term matters

Stopping SIPs early hurts returns; staying invested long-term matters
2 years vs 10 years: What investors lose by stopping SIPs early and why staying invested matters · livemint.com

A SIP is like putting a little money aside every month to buy small parts of big companies.

When prices go down, your money buys more shares, and when prices go up, it buys fewer.

This trick, called rupee cost averaging, lowers the average price you pay over time.

If you stop early, you miss out on buying cheap shares when the market is low.

Data from India's Nifty50 shows that people who stayed invested for at least seven years never lost money.

Whether you started at the market's highest or lowest point made almost no difference after ten years.

Pausing for just six months can delay reaching your savings goal by nearly five months.

Adding a bit more to your SIP every year can help you reach a big goal much faster.

So staying invested and slowly increasing your amount works better than stopping when the market dips.

Key facts

Instrument
Systematic Investment Plan (SIP) in mutual funds
10-year Nifty50 TRI SIP returns by entry point
12.59% (year's highest level), 12.8% (year's lowest level), 12.9% (first trading day)
Worst 2-year rolling SIP return
-39.8%
Worst 5-year rolling SIP return
-4.4%
Minimum 7-year SIP return
0.4% (no negative returns at 7+ years)
Average 10-year Nifty50 TRI SIP return
12.55%
Impact of 6-month pause after 2 years
Delays ₹1 crore goal by 4 months and 27 days
Annual top-up impact on ₹1 crore goal
No top-up: 17 years; 5% top-up: 15 years; 10% top-up: 13 years

Quotes

Ravi Kumar TV

Co‑founder of Gaining Ground Investment Services

“Young investors are often looking at the last one year's returns of a fund on an app and expecting the same returns to continue. They are not linking their investments to long-term goals, which is why the investments lack purpose and when short-term returns turn weak, they are quick to stop or switch.”
livemint.com
“Younger investors who are just starting out should top up their SIP every time they get an increment. It does not have to be the full increment.”
livemint.com

Sources

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