2 years vs 10 years: What investors lose by stopping SIPs early and why staying invested matters

Systematic Investment Plans (SIPs) are financial instruments designed to invest a fixed amount periodically in different mutual fund categories, with equity SIPs generally recommended for long-term investing. Data suggests that equity mutual fund investors should look beyond short-term returns as the probability of losing money tends to decline with longer holding period.

Why long-term?

SIPs work on rupee cost averaging - which means, you get to buy more mutual fund units when the market falls and fewer units when markets are high - which lowers the average cost of buying in the long term. This means early withdrawals and stopping an SIP in a falling market give up the units that could have been accumulated at lower prices.

What data suggests?

According to data, the timing of investment may not make much difference for those who stay invested in the long term.

A Mint report analysed data on 10-year SIPs in Nifty50 at three different starting points in the same year: the year's highest level, the first trading day of the year and the year's lowest level. The results were broadly similar. Check the table below:

Investors in the early years of an SIP are more likely to be exposed to negative returns in the short run because a small corpus and short holding magnify the effect of a falling market. This is often the case with weak one-year or three-year SIP returns.

Can you eliminate the chances of negative return?

To understand this, let's take a closer look at the minimum and average rolling SIP returns of Nifty50 TRI from 1 April 2005 to 3 August 2026, across different start dates and holding periods. The data indicates that the share of loss-making SIPs falls sharply as the holding period increases. Those who stayed invested for a minimum of 7 years didn't get a negative return.

Over longer periods, average SIP returns also settle into a narrow band. For 5, 7 and 10-year periods, average rolling returns stood at 12.65%, 12.47% and 12.55% for the Nifty 50 TRI.

Co-founder of Gaining Ground Investment Services Ravi Kumar TV explained how temporarily halting an SIP delays the long-term goal. He said, “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."

This can be illustrated with an example: A ₹20,000 monthly SIP giving 10% annual return would reach the ₹1 crore goal in its 17th year. If an investor pauses investment for six months after two years into the SIP, the term for achieving the goal would extend by 4 months and 27 days.

How does topping up an SIP shorten the goal period?

Taking the same example of ₹20,000 SIP, an investor with 5% annual top-up reaches ₹1 crore goal in the 15th year, while a 10% annual top-up will help achieve the same in the 13th year.

Founder of Plan Rupee Investment Services, Amol Joshi, advised, “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.”

“The simpler way is to fix the SIP as a percentage of salary. Then it rises on its own every time the salary does, and you are not making a fresh decision each year. Part of the increment goes into improving your lifestyle, and part of it goes towards your investments to meet your financial goals,” he added.