SIP: Staying the Course

Seasoned market professionals who have watched cycles unfold over decades tend to agree on one enduring lesson: markets reward discipline far more reliably than they reward prediction. Whenever volatility dominates headlines, investors ask the same question in different accents: should I pause my SIP until things settle down? Across cycles, the professional response has remained consistent. Do not pause your SIP because of adverse market news.

A Systematic Investment Plan (SIP) was never designed for comfort. It was designed for continuity. It works not because markets are always kind, but because time eventually is. The familiar adage that “time in the market matters more than timing the market” becomes most relevant precisely when markets appear weakest.

Market Reality

Volatility is not a defect. It is a feature. Every long-term wealth chart that inspires confidence is built on phases of uncertainty, corrections, and sharp drawdowns. When markets fall, SIP investors automatically buy more units at lower prices. This simple arithmetic - rupee cost averaging - is often underestimated in its long-term impact.

There are countless examples of investors who continued their SIPs through severe downturns such as the global financial crisis or the Covid period faced bleak news flows, portfolios showed losses, and unsolicited advice was plentiful. Those who stayed invested often found, years later, that their average cost was significantly lower than those who paused and re-entered at higher market levels. Their returns were not the result of superior timing. They were the outcome of mathematics and discipline.

A simple analogy helps. Think of an SIP like buying household essentials every month. When prices fall, the same budget buys more quantity. Consumers rarely stop buying essentials because prices are lower. They benefit from it. Investing follows a similar logic, though emotions often interfere.

Behavioural Challenge

One of the biggest threats to SIP success is not market volatility, but human behaviour. Fear during downturns and greed during rallies often push investors to act against their long-term interests. Pausing SIPs during weak markets is a classic example of loss aversion in action.

Decades of investor data consistently show that those who stopped SIPs during volatile periods underperformed those who remained invested. Missing even a few strong recovery months can significantly dent long-term returns.

Markets do not announce recoveries in advance. By the time confidence returns, prices usually already have. An old saying captures this perfectly: The best time to plant a tree was twenty years ago. The second-best time is now. SIPs initiated or continued during market weakness often grow into the strongest contributors to a portfolio.

Compounding Effect

Compounding thrives on patience, not excitement. Each SIP instalment works quietly towards future goals. During weak markets, compounding often accelerates because more units are accumulated at lower prices.

Consider two investors. One continues a Rs.10,000 monthly SIP uninterrupted for fifteen years. The other pauses for two years during volatile phases. At the end of the period, the first investor often ends up with a noticeably larger corpus, despite investing only marginally more. The difference lies in continuity and compounding, not superior intelligence.

No wonder, Albert Einstein called compounding the eighth wonder. Those who understand it benefit from it. Those who interrupt it unknowingly pay a price.

Goal Alignment

SIPs are not meant to react to daily headlines. They exist to serve long-term goals such as retirement, children’s education, or financial independence. When SIPs are aligned with goals rather than news flow, volatility becomes far less intimidating.

Investment professionals generally advise reviewing asset allocation rather than abandoning discipline. During market declines, equity exposure naturally reduces as portfolio values fall. Continuing SIPs during such phases helps restore balance over time in a healthier and more systematic manner.

In aviation, pilots do not abandon their flight path because of turbulence. They rely on instruments and training. SIPs serve a similar purpose in long-term investing. Trusting them during turbulence is part of the journey.

(The writer is a retired banker and author of ‘Money Does Matter.’)