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Don't Quit SIPs Early: Data Shows Long-Term Gains
10 Aug
Summary
- Five-year-plus SIPs in direct plans declined by 35% in FY26.
- Short-term SIP returns are weak due to recent market conditions.
- Longer SIP durations significantly reduce the probability of losses.
Recent data indicates a concerning trend of investors discontinuing Systematic Investment Plans (SIPs) prematurely, especially in direct plans where longer-term holdings saw a significant decline. In FY26, SIPs held for over five years in direct plans decreased by approximately 35%. This behaviour is linked to recent market volatility and a tendency to focus on short-term performance, which has been subdued.
Analysis of rolling returns from April 2005 to August 2026 reveals a clear pattern: the longer an SIP is maintained, the lower the probability of incurring losses. For instance, on the Nifty 50, the percentage of two-year SIP periods ending in the negative was 14.2%, dropping to 0.5% for five-year periods. This underscores the benefit of patience and long-term investing.
Experts suggest that readily available investment apps may encourage impulsive decisions, particularly among younger investors who haven't experienced market downturns. Pausing an SIP, even for a short period, can delay financial goals, with breaks extending the time to reach targets by months. Conversely, increasing SIP contributions early on, through methods like annual top-ups, can significantly accelerate goal achievement.
