The Man Who Stopped at Exactly the Wrong Moment
Sumanth, 34, is a procurement manager from Bengaluru. He started SIPs in 2018 — ₹20,000 per month across three equity funds. Disciplined, patient, doing everything right.
Then March 2020 happened. In six weeks, the Nifty 50 crashed from around 12,000 to 7,500 — a 38% fall. Sumanth's portfolio, built over two years, was down sharply. He watched it every day. By mid-March, he paused all three SIPs. "I'll restart when things stabilise," he told himself.
Things stabilised — and then some. By September 2021, eighteen months later, Nifty was above 17,000. Sumanth looked at the markets and decided they seemed reasonable again. He restarted his SIPs.
Here's what happened in those 18 months he was out: the SIP instalments he would have made — 18 months × ₹20,000 = ₹3.6 lakh — would have purchased units at the lowest prices of the last decade. The units bought in April, May, and June 2020 between ₹7,500 and ₹9,000 levels were worth 90–120% more just 18 months later. He missed all of them.
He didn't fail at SIPs. SIPs worked exactly as designed. He stopped when the mechanism was doing its most important work for him. This is the most expensive mistake in SIP investing, and it's extremely common.
Myth 1: SIP Guarantees Returns
SIP does not guarantee returns. A Systematic Investment Plan is a mechanism — a way of investing a fixed amount regularly — not a product with a promised outcome. The returns depend entirely on the fund you choose and the market returns over your holding period.
What SIP does guarantee is rupee-cost averaging: because you invest a fixed rupee amount at regular intervals, you automatically buy more units when prices are low and fewer units when prices are high. Over time, this lowers your average cost per unit compared to lump-sum investing at a single point. This is genuinely useful — but it's a risk-management benefit, not a return guarantee.
If you invest in an equity fund through SIP and markets fall and stay down over your entire investment horizon, you will lose money. This is unlikely over 10+ years in Indian markets historically, but it is possible. SIP does not eliminate this risk.
Myth 2: Stop SIP When Markets Fall
This is the single most damaging SIP myth. Stopping SIPs during a correction is the investment equivalent of refusing to buy vegetables when they're on sale because their price has dropped.
When the market falls 30%, your ₹10,000 monthly SIP buys 43% more units than it would have at the pre-crash price. These units — purchased at a steep discount — are what drive superior long-term returns. The investors who kept their SIPs running through March 2020 and bought at ₹7,500–8,000 Nifty levels watched those units triple in value by 2024.
The investors who stopped missed those units entirely. They didn't just avoid a loss — they gave up the exact opportunity that makes long-term SIP investing work.
The instinct to stop is understandable. Watching a portfolio fall is genuinely uncomfortable. But the SIP mechanism is specifically designed for this — it forces disciplined buying at all price levels, including the lows that feel the worst but produce the best long-term returns.
The right response to a market crash: Keep your SIP running. If you have cash, add more. If you can step up your SIP amount temporarily, do it. The crash is the sale — not the reason to stop shopping.
Myth 3: The Date You Pick Matters
This one has inspired tremendous amounts of research, WhatsApp forwards, and YouTube videos — all essentially finding nothing meaningful.
Studies comparing SIP returns from the 1st, 5th, 10th, 15th, 20th, and 28th of the month across 10, 15, and 20-year periods consistently find that the difference in annualised returns is less than 0.1–0.2%. That's not statistically significant. It gets completely washed out by fund selection, holding period, and investor behaviour.
Pick a date that is 2–3 days after your salary credit. This ensures the money is in your bank account when the SIP debit happens, so you don't get hit by a failed transaction. That's the only meaningful consideration.
Myth 4: More Funds = More Diversification
This might be the most common structural mistake I see in client portfolios when they first come to me. Twelve SIPs across twelve different equity funds doesn't mean twelve times the diversification. In most cases it means twelve overlapping portfolios of the same 50–100 large-cap stocks, with twelve expense ratios, twelve statements to track, and twelve NAVs to watch.
A Nifty 50 index fund already holds the 50 largest Indian companies. A flexi-cap fund might hold 60–80 stocks. A large and mid-cap fund might hold 80–100. If you own all three, you own the same stocks three times — differently weighted but substantially overlapping. You haven't diversified. You've just made portfolio management more complicated.
For most individual investors, 2–4 well-chosen funds are sufficient: a large-cap or index fund as the core, a mid-cap or flexi-cap for growth, and perhaps an international fund for geographic diversification. Beyond that, you're adding complexity without adding meaningful diversification.
Myth 5: You Need to Monitor It Every Month
You don't. In fact, checking your SIP portfolio every month and reacting to what you see is more likely to hurt your returns than help them. The research on investor behaviour consistently shows that more frequent monitoring leads to more trading, more switching, and lower long-term returns — because people exit when they're uncomfortable and re-enter when they feel better, which is almost always the opposite of optimal.
A reasonable review cadence for long-term SIPs: once a year. Check whether your fund's category returns are competitive relative to peers (not whether the NAV went up or down last month). Check whether your asset allocation has drifted significantly from your target. Make small adjustments if needed. Then leave it alone for another year.
The worst thing you can do is check your portfolio every day during a correction. You will feel terrible, make an emotional decision, and either pause your SIP or switch to a "safer" fund — which are both usually mistakes.
Myth 6: Any Fund + Long SIP = Good Result
Fund selection does matter. Not for the reason people think — not because you can consistently identify the fund that will top the charts next year — but because consistently poor fund management, very high expense ratios, or investing in a category that doesn't suit your goal can significantly reduce returns.
A fund with a 2.5% expense ratio in the direct plan (which doesn't exist, but illustratively) vs a fund with 0.1% will show a 2.4% annual return difference — compounding over 20 years, that's enormous. More practically: a regular plan vs a direct plan of the same fund has a 0.5–1.2% annual expense difference. Over 20 years of SIPs, the direct plan investor will have 15–25% more corpus.
The practical guidance: for large-cap exposure, a Nifty 50 or Nifty 100 index fund (direct plan) is a hard benchmark to beat consistently. For mid-cap and small-cap, active management has historically added more value in India — but still invest via direct plans and review performance every 2–3 years against the category average.
Myth 7: Short-Term Equity SIPs Are Fine
Equity mutual funds are volatile in the short term. A 3-year SIP in an equity fund is not really "long term" — in Indian markets, there have been 3-year SIP windows that delivered negative returns (2006–2009 is the most glaring example). Even SIPs that ran for exactly 5 years ending in March 2020 produced poor returns in some cases.
The general guidance: equity SIPs should run for at least 7–10 years. For goals within 3 years, equity is inappropriate — use liquid funds, short-term debt funds, or bank FDs. For goals 3–7 years out, a hybrid approach makes sense. For goals 10+ years away, equity is where you want to be.
The problem is when people set up a 3-year SIP for a goal — home down payment, car purchase — in an equity fund, experience a market correction in year 2, and have to sell at the bottom. This isn't bad luck. It's a mismatch between the product's risk profile and the goal's timeline.
FAQ
Should I stop my SIP when markets are falling?
No — this is one of the most costly mistakes an SIP investor can make. When markets fall, your monthly SIP buys more units at lower prices. These lower-cost units are what generate the highest returns when markets recover. Stopping during a correction means you bought at higher prices before the fall, miss the low-price purchases during the fall, and often restart at higher prices after recovery — essentially the worst possible pattern for long-term returns.
Does the SIP date — 1st, 10th, 15th — make a difference to returns?
Research consistently shows the SIP date has negligible impact on long-term returns. Studies comparing returns from SIPs on different dates show differences of less than 0.1–0.2% per year over 10-year periods. Pick any date that is 2–3 days after your salary credit — so the money is in your account when the debit runs — and don't overthink it.
How many mutual funds should I have running SIPs into?
For most individual investors, 2–4 funds is sufficient. A large-cap index fund as the core holding, a mid-cap or flexi-cap for growth, and possibly an international fund for geographic diversification. Beyond 4–5 funds, you're adding portfolio complexity without meaningful diversification benefit — most large-cap equity funds in India have substantial overlap in their top 20–30 holdings.
How long should I run an equity SIP for it to work properly?
For equity SIPs to work as intended, the minimum meaningful horizon is 7–10 years. Over any rolling 10-year period in Indian equity markets since 1990, Nifty 50 has not delivered negative returns. Over 3-year SIP periods, there have been negative outcomes during 2006–2009 and similar windows. The longer you run the SIP without interruption, the more the rupee-cost averaging effect accumulates — and the more your early units, bought at lower prices, compound.
