Systematic Investment Plan i.e. SIP was started so that the interference of emotions in investment is reduced and people can create wealth in the long run with discipline. But the reality is that emotions still remain the biggest enemy of SIP investors.
As soon as there is a correction in the market or there is a prolonged slowdown, a large number of investors stop SIP midway. Data for December 2025 shows that investment in mutual funds through SIP declined by more than 6 percent.
Let us know the reasons why investors are stopping SIP and what harm it can cause.
Why is SIP Stoppage Ratio an alarm bell?
Data from the Association of Mutual Funds of India (AMFI) shows that the trend of closing SIPs has increased continuously in the last five years.
- FY22: 41.74%
- FY23: 56.94%
- FY24: 52.41%
- FY25: 75.63%
- FY26 (till December): 98.98%
The situation in FY26 became such that as many new SIPs were started, almost the same number of SIPs were closed. This figure is much higher than the normal historical level of 40-50% and clearly shows the uneasiness of investors.
The weak link hidden behind increasing SIP amount
On the face of it, it seems that the SIP culture is getting stronger in India. Every year a new record of investment in SIP is being created.
But beneath this lies a less discussed truth. Money is coming in in SIP, but a large number of SIPs are not running long enough for the investor to get the real benefit from them. Registration of new SIPs has slowed down, while the number of SIPs being closed has increased rapidly.
Why do investors leave SIP midway?
Market fall: The biggest benefit of SIP is available during market decline. When the market falls, the same monthly investment buys more units and the average cost comes down. This is rupee cost averaging.
But this period is also the most frightening for investors. As soon as the decline is seen, panic increases and the SIP is stopped. Often investors think that they will start SIP again when the situation improves, but by then the market has gone up.
Financial compulsion: Fear is not the reason for stopping SIP every time. Circumstances like job loss, medical emergency, increasing household expenses or loss in business force many investors.
The Corona period was a big example of this, when the SIP stoppage ratio increased as uncertainty increased.
Incomplete understanding: Many new investors consider SIP as a means of short term earning. In a bull market, expectations become very high and as soon as returns weaken, SIPs are closed.
Some investors stop SIP just because their fund has not performed well in a year. This thinking is completely contrary to the basic spirit of SIP.
Quick Exit: AMFI data shows that investors stay longer in Regular Plan (investment with advice). At the same time, direct plans i.e. investments of their own choice are closed quickly.
The share of direct plans in SIP lasting more than 5 years is only 19%. Whereas in the regular plan it is 33%. This means that investors in direct plans are more afraid of market decline and close SIPs early. The presence of an advisor protects investors from emotional decisions.
SIP closure easy: Today, as easy as it is to start a SIP, it has become even easier to stop it. After one or two bad months, SIP is stopped without much thought.
This facility provides relief in the short term, but causes huge losses in the long term.
How much loss is caused by stopping SIP midway?
The key to building wealth through SIP is compounding. If you stop SIP midway, the biggest loss is due to compounding. Now suppose an investor does a SIP of ₹5,000 per month and gets an average return of 12%.
- In 5 years: ~₹4 lakh
- In 10 years: ~₹11 lakh
- In 15 years: ~₹23 lakh
- In 20 years: ~₹46 lakh
If an investor stops SIP at 10 years, he loses about 76% of his wealth compared to 20 years. The real magic of compounding happens in the second decade, but most investors exit before they get there.
Missing the best days of the market
Equity returns are generated on select days. If the investor stops SIP, then the most important days of sharp market recovery are missed.
Sensex data shows that missing the 10 best days can reduce returns by more than half. Missing the 30 best days can wipe out all returns. This clearly means that SIP does not fail because the market does not give returns. SIP fails because the investor abandons it midway.
The most money is made when it seems most difficult to continue investing. Investors who stop SIP for temporary relief suffer permanent losses in the long run.
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Disclaimer: The information provided here is being given for information only. It is important to mention here that investing in the market is subject to market risks. As an investor, always consult an expert before investing money. Moneycontrol never advises anyone to invest money here.