Why your SIP is not the enemy in a down market
When the Sensex falls 15%, the first instinct is to pause the SIP. Here is the arithmetic on why that month is the one that pays you back most.
By Plabita Priyadarshi, Founder & Managing Director
Every correction, our phones ring with the same request. "Can we stop the SIP for a few months, till things settle?"
We understand the feeling. You check the app, the portfolio is red, and putting more money into something that is falling feels like a mistake. It is not. For a long-term SIP, a falling market is the part of the plan that does the heavy lifting.
The arithmetic
Take a ₹10,000 monthly SIP over five months. The fund's NAV moves like this: 100, 80, 70, 90, and back to 100.
| Month | NAV | Units bought |
|---|---|---|
| 1 | 100 | 100.0 |
| 2 | 80 | 125.0 |
| 3 | 70 | 142.9 |
| 4 | 90 | 111.1 |
| 5 | 100 | 100.0 |
You invested ₹50,000. You hold 579 units. At an NAV of 100, they are worth ₹57,900.
The NAV ended exactly where it started. You are still up 15.8%. That gain came entirely from months 2, 3 and 4, the months most people want to skip.
Pause the SIP in month 2 and restart in month 5, and you buy 200 units for ₹20,000. No gain at all.
What a pause really costs
A pause does not protect you from the fall. The money already invested falls either way. A pause only removes the cheap units from the recovery. You keep the pain and give away the reward.
When we do pause a SIP
We are not dogmatic. We will pause or reduce a SIP when:
- The money is needed within 3 years. Then it should not be in equity at all, and we move it.
- Income has genuinely dropped. A job loss or a business slowdown changes the plan, not the market.
- The emergency fund is empty. Liquidity comes first. Six months of expenses, then the SIP.
None of these three is about the market. That is the point. A SIP decision should be about your life, never about the Nifty's last fortnight.
What we tell clients in a red month
Look at the date on your goal, not the number on your screen. If the goal is 10 years away, this month's NAV is a discount, not a verdict.
And if you still cannot sleep, call us. That is what the review is for. We would much rather spend twenty minutes on the phone than watch a good plan get dismantled in a bad week.