The mutual fund systematic investment plan (SIP) stoppage ratio in the country rose marginally to 75.62% in February from 74.83% in January, according to recent data. While the number of discontinued SIPs declined, monthly SIP inflows dropped to ₹29,845 as detailed in a report by the Association of Mutual Funds in India (AMFI).
Still, new registrations remained strong at over 65 lakh, indicating that disciplined investors are continuing to repose faith in the equity markets, despite market volatility and fluctuations. This is a clear indication that, even as some investors pause SIPs in volatile phases, many still maintain the dedication required for systematic investments, signalling the resilience of SIP investors.
Therefore, market movements driven by ongoing geopolitical complications, such as the US-Iran conflict and the Russia-Ukraine war, can be psychologically stressful for market participants. It is natural to wonder whether you should pause your SIP in such a backdrop. Still, market veterans and experts warn that such moves could backfire in the long run. This is because staying composed and disciplined through volatility often works in your favour.
Why continuing SIPs matters
Viram Shah, Co-founder & CEO, Vested Finance, explains, “Reducing SIPs just because markets are volatile often doesn’t make sense. SIPs are meant for disciplined investing through uncertain times, leveraging dollar-cost averaging, buying more when prices are low, and less when high. Over long periods, discipline matters more than timing the market.”
He further stated, “The MSCI World Index has delivered 8.93% annualised (14.42% in INR) since 1987, showing that returns and volatility always coexist. Whether in global funds, stocks, or customised portfolios, continuing SIPs through uncertainty remains a strong strategy.”
Therefore, it is critical to acknowledge the fact that market corrections provide investors with opportunities to buy more units at lower prices. Rupee cost averaging brings down the cost of acquiring over time, and staying invested for long periods ensures healthy compounding of wealth. This makes continuing with SIPs critical, especially during economic downturns. To put it simply, when an individual reacts to short-term market movements, such behaviour often limits their potential gains.
Volatility is part of the investing journey
According to Swapnil Aggarwal, Director, VSRK Capital, pausing your SIP during market volatility is generally not advisable. “Volatility is precisely when SIPs work most effectively. Stopping SIPs out of panic can be counterproductive. SIPs help accumulate more units at lower valuations, benefiting from rupee cost averaging. Markets are cyclical; continuing SIPs ensures long-term compounding and better cost efficiency, while increasing contributions during dips can further enhance returns,” Aggarwal noted.
This clearly demonstrates the importance of consistency, patience and devotion in investing, as volatility is a normal part of investing in both mutual funds and equity markets. Further, consistency holds more value than timing the equity markets. Discipline during tough times is key to long-term wealth creation.
What should you do?
Instead of permitting short-term market noise to drive your decision-making, try to focus on your long-term financial objectives. Have a discussion with a certified financial advisor, and clearly understand your current financial reality, long-term possibility and limitations.
Only after that should you develop a professionally guided investment plan. This plan will protect your personal finances and help you improve long-term wealth outcomes.
If financial conditions permit and your financial advisor recommends it, increasing mutual fund contributions during equity market declines can eventually help accelerate growth. Still, proper risk management and understanding of fundamentals are a must. Staying informed, disciplined, and aligned with your goals is what ultimately builds sustainable wealth.
Disclaimer: This content is for informational purposes only and does not constitute financial advice. Investments in mutual funds and the stock market are subject to market risks. Readers should consult a certified financial advisor before making any investment decisions.
