Systematic Investment Plans (SIPs) are designed to remove emotion from investing. This helps investors build long-term wealth with disciplined investing.
However, emotions remain their biggest enemy. Every market correction or painful consolidation quietly pushes investors toward the exit.
According to the Association of Mutual Funds in India (AMFI), the SIP stoppage ratio has been steadily increasing over the past five years.
The SIP stoppage ratio was 41.74% in FY22, which increased to 56.94% (FY23), 52.41% (FY24), and 75.63% (FY25).
This ratio stood at 98.98% as of December in FY26. This means that for every 100 new SIPs registered during FY26, 98.98 SIPs were closed.
| SIP Stoppage Ratio (%) | ||||||
| FY20 | FY21 | FY22 | FY23 | FY24 | FY25 | FY26# |
| 57.84 | 60.88 | 41.74 | 56.94 | 52.41 | 75.63 | 98.98 |
| Source: AMFI (# Data till December) | ||||||
The stoppage is higher than normal historical levels of around 40–50%.
A high stoppage ratio reflects caution or discomfort among retail investors. This can be due to market volatility or lower-than-expected returns, prompting them to book profits.
The consequence is stark: what begins as a disciplined monthly habit often ends far earlier than planned.
And they pay a heavy price in the long run, because SIPs are most valuable when the markets are not doing well, precisely when many investors abandon them.
We explain why investors quit SIP midway and what costs them in the long run…
The Hidden Cracks Beneath Rising SIP Contributions
SIPs have gained immense popularity in India, especially after the 2020 market crash, allowing investors to profit from the subsequent recovery.
The data backs this claim…
| SIP Contribution (Rs bn) | ||||||
| FY20 | FY21 | FY22 | FY23 | FY24 | FY25 | FY26# |
| 1,000.84 | 960.80 | 1,245.66 | 1,559.72 | 1,992.19 | 2,893.52 | 2,566.55 |
| Source: AMFI (# Data till December) | ||||||
On the surface, this appears to be the rise of a long-term investing culture.
Beneath it, however, lies a less-discussed reality. A large proportion of these SIPs do not survive long enough to deliver meaningful outcomes.
Although SIP contributions remain strong, new SIP registrations have slowed.
Furthermore, the stoppage ratio has also increased, leading to a higher SIP stoppage ratio.
| SIP Registered and Discontinued Trend (FY26) (In Lakhs) | |||||||||
| No. of SIPs | April | May | June | July | August | September | October | November | December |
| Opened | 46.01 | 59.15 | 61.91 | 68.69 | 55.23 | 57.73 | 60.25 | 57.14 | 60.46 |
| Closed/ Matured | 162.32 | 42.66 | 48.16 | 43.04 | 41.14 | 44.03 | 45.10 | 43.18 | 51.57 |
| Source: AMFI | |||||||||
Negative returns for small and mid-cap funds amid market corrections and painful consolidations could be the main drivers why investors are quitting SIPs midway.
And this is not new: investors flock in during bull markets and leave during bear markets.
However, SIPs work because of time, consistency, and the ability to stay invested when nothing feels reassuring. That last requirement is where many investors struggle.
Why Investors Quit SIPs Early
Fear-Driven Exits during Market Volatility
SIPs work best during market volatility. When markets dip sharply, your fixed monthly investment buys more units at lower prices.
Over time, this lowers your average cost per unit, exactly the principle behind rupee-cost averaging. It’s this quiet, compounding advantage that turns temporary market pain into long-term gain.
However, such market dips often trigger panic and anxiety among investors.
Many retail investors (especially those who invest on their own) stop SIPs during market stress. Historically, SIP stoppages have increased when the market falls, and vice versa.
Investors convince themselves they will restart once things settle down. And indeed, when the market performs well, they return in large numbers.
However, by the time confidence returns, prices have already moved up.
Liquidity stress and real-life disruptions
However, not all investors get carried away by emotions and stop their SIPs.
Many genuinely need money. A job loss, a medical emergency, rising household expenses, or a business downturn may force them to put their monthly investments on hold.
The pandemic highlighted this vulnerability when uncertainty rose sharply, resulting in higher stoppage rates. The SIP stoppage ratio increased to 60.88% in FY21 from 57.84% in FY20.
Behavioural biases and lack of awareness
Many new or small investors lack long-term discipline or a full understanding of SIPs’ benefits. Lack of financial literacy and reluctance to seek professional advice are among the reasons for this.
SIPs attract first-time and small-ticket investors, many of whom have limited exposure to market cycles.
Without a clear understanding of how equity returns actually unfold, expectations rise.
Bull markets always fuel expectations of continued market gains. But when the market corrects, they hit the exit button.
Some investors also stop SIPs because their fund has underperformed for a year.
Many investors chase last year’s top-performing category and stop allocating to those that look dull.
This performance-chasing behaviour clashes directly with how SIPs are meant to work.
Why Regular Plan Beats Direct Plans
Over the last five years, the share of direct plans in total SIP AUM has increased from 12% of AUM (as of March 2020) to 21% by March 2025.
However, unlike direct plans, investors in regular plans (with professional advice) stay invested for a long period.
As per AMFI, unlike direct plans, regular plans have a significantly higher proportion of SIP assets held for more than five years.
As of March 2025, only 19% of SIP assets under management (AUM) in direct plans remained invested for more than 5 years, compared to 33% in regular (advised) plans.
Also, the proportion of SIP assets held for less than 1 year in regular plans is 19%, unlike 30% in direct plans. This means SIP investors in regular plans tend to stay invested longer than direct plans.
In a volatile market, over 80% of direct-plan SIP redemptions occurred within the first year, according to a Karvy investor study.
The lower early exits in regular plans suggest that distributor-led advice helps investors remain disciplined during short-term market volatility.
| Holding Period of SIP AUM | ||||
Holding Period | Direct Plan | Regular Plan | ||
| March 2020 | March 2025 | March 2020 | March 2025 | |
| > 5 Years | 3 | 19 | 12 | 33 |
| > 4 Years up to 5 Years | 4 | 7 | 5 | 9 |
| > 3 Years up to 4 Years | 6 | 10 | 8 | 10 |
| > 2 Years up to 3 Years | 13 | 14 | 13 | 13 |
| > 1 Year up to 2 Years | 25 | 20 | 21 | 16 |
| > 1 Year | 49 | 30 | 41 | 19 |
| Source: AMFI Annual Report (FY25) | ||||
In contrast, direct plan investors appear more prone to stopping or redeeming SIPs early, making flows less stable.
This wide gap shows that the presence of an advisor often serves as a behavioral guide, helping investors stay put during market volatility.
Disconnect Between Return Expectations and Risk Tolerance
Investors often approach the equity market as a money-making machine, aiming for short-term returns without analysing their risk appetite. In fact, mutual funds are best suited for long-term investments.
And when market fluctuations increase the risk, they stop the SIP.
This mismatch between return expectations, risk tolerance, and time horizon is one of the most expensive behavioural errors in personal finance.
Digital convenience and impulsive decisions
For a country like India, where financial awareness is low, technology is both a boon and a bane for SIP investments.
It has lowered entry barriers, but also lowered exit barriers. Now, it takes a few minutes to start a SIP and even less time to stop it.
This ease has unintended consequences. Investors stop SIPs after one or two bad months, often without reassessing long-term goals.
This reversible decision compounds into a significant loss over time. Convenience, in this context, has made quitting dangerously easy.
The Compounding Penalty
The long-term financial impact of stopping a SIP prematurely can be dramatic.
Consider a simple example. An investor runs a Rs 5,000 monthly SIP assuming a long-term equity return of 12%.
His total corpus at the end of 5 years will be Rs 4 lakh. Extend that to ten years, and it grows to about Rs 1.1 million (m). At fifteen years, it crosses Rs 2.3 m. At twenty years, it approaches Rs 4.6 m.
This number suggests that a 20-year SIP builds roughly four times the corpus of a 10-year SIP. This also demonstrates that an investor who stops at the 10-year mark forgoes about 76% of the eventual corpus.
Thus, each extra year of compounding matters hugely.
The second decade contributes more wealth than the first, even though the monthly investment remains unchanged. This is compounding at work.
When investors exit early, they miss the most powerful phase of wealth creation.
Loss of compounding time
Many investors believe they can “make up later” by restarting SIPs or investing larger sums in the future.
This assumption ignores how compounding actually works. Time is not linear in investing.
The early years lay the foundation, but the later years do the heavy lifting.
As in the example above, the difference between the corpus at the end of years 10 and 15 is Rs 1.2 m, but it grows to Rs 2.3 m in the next five years.
This shows that wealth grows in later years as returns begin to compound.
Nearly 98% of Warren Buffett’s wealth came after the age of 65, a reminder that long-term compounding accelerates sharply only in the later decades.
A five-year interruption cannot be compensated simply by higher contributions later unless those contributions are significantly larger.
The cost of missing the market’s best days
Interruptions also increase the risk of missing the market’s strongest rebound/gain days.
Equity returns are not evenly distributed. A small number of exceptional trading days account for a large share of long-term gains.
Historical analysis of Indian markets shows that missing just the ten best trading days over long periods can cut overall returns by more than half.
A December 2021 report by HDFC Securities analysed the BSE Sensex between January 2009 and November 2021 and showed how costly market timing can be.
An investor who remained fully invested over the period would have earned a 509% return.
However, missing just the five best trading days would have reduced the return to 296%.
Sitting out the 10 best days would have brought returns down further to 209%, while missing 20 of the best days cut gains to 118%.
Missing the best 30 days would have wiped out gains altogether, resulting in a negative return of 18%.
This shows that by staying out during downturns, investors often lose, even if they re-enter later.
Bottom line
SIPs rarely disappoint because markets fail to deliver. They disappoint because investors exit before time is allowed to do the heavy lifting.
The real cost of stopping early is not the loss incurred during a volatile phase, but the compounding that never gets to play out in the later years.
Each interruption shortens the runway, increases the risk of mistimed re-entry, and steadily compresses long-term outcomes.
Equity investing rewards endurance unevenly. The early years build the base, but the bulk of wealth is created much later, often after periods when staying invested feels least comfortable.
Investors who quit midway may not feel the impact immediately.
But the gap becomes evident when financial goals approach, and the final corpus falls short of what time and consistency could have delivered.
The message is clear: staying invested until the goal is reached matters far more than reacting to short-term market discomfort.
Those who exit early often trade temporary relief for a permanent shortfall in long-term wealth.
Happy investing.
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