Why Are Investors Stopping SIPs? The Fear Behind the Trend and Its Long-Term Impact Explained

Systematic Investment Plans (SIPs) were introduced to help investors stay disciplined and build wealth steadily over time, regardless of market ups and downs. The idea was simple: invest regularly, ignore short-term volatility, and let compounding do the heavy lifting. However, recent data suggests that emotions still play a dominant role in investment decisions. As market uncertainty rises, a growing number of investors are discontinuing their SIPs midway — often at the worst possible time.

According to December 2025 data, monthly investments flowing into mutual funds through SIPs fell by over 6%. Even more concerning is the sharp rise in the SIP stoppage ratio, which has climbed close to 99%, signaling deep investor anxiety.

SIP Stoppage Ratio: A Growing Cause for Concern

Data from the Association of Mutual Funds in India (AMFI) reveals a worrying trend over the past five years:

• FY22: 41.74%

• FY23: 56.94%

• FY24: 52.41%

• FY25: 75.63%

• FY26 (till December): 98.98%

In FY26, almost as many SIPs were stopped as were newly registered. Historically, the SIP discontinuation ratio hovered between 40% and 50%. The current spike clearly reflects growing fear and lack of confidence among retail investors.

The Illusion of Rising SIP Numbers

At first glance, India’s SIP culture appears strong. Every year, total SIP inflows hit new record highs. But beneath this surface-level growth lies an uncomfortable truth: a large number of SIPs do not last long enough for investors to experience their true benefits.

New SIP registrations have slowed, while closures are accelerating. As a result, many investors exit before long-term compounding can work in their favor.

Why Do Investors Stop SIPs Midway?

1. Market Corrections and Volatility
Ironically, the biggest advantage of SIPs comes during market downturns. When markets fall, the same monthly investment buys more units, reducing the average cost — a concept known as rupee cost averaging.

However, this phase is also the most emotionally challenging. As portfolios show temporary losses, panic sets in. Many investors stop their SIPs, believing they will restart once conditions improve. By the time confidence returns, markets have often already recovered.

2. Financial Pressures
Not all SIP stoppages are driven by fear. Job losses, medical emergencies, rising household expenses, or business setbacks often force investors to pause or stop investments. The COVID-19 period is a prime example, when uncertainty led to a sharp spike in SIP discontinuations.

3. Lack of Long-Term Understanding
Many first-time investors mistakenly view SIPs as a short-term profit tool. During bull markets, expectations soar. But when returns underperform for a year or two, disappointment leads to premature exits. Judging a long-term investment on short-term performance defeats the very purpose of SIPs.

4. Absence of Professional Guidance
AMFI data shows that investors in regular plans (with advisor support) tend to stay invested longer than those in direct plans. SIPs running for over five years account for only 19% in direct plans, compared to 33% in regular plans. Advisors often help investors avoid emotionally driven decisions during market downturns.

5. Ease of Stopping SIPs
Starting and stopping SIPs has become extremely easy. A few clicks after a couple of bad months can halt an investment that was meant to run for decades. While this offers short-term relief, it often causes significant long-term financial damage.

How Much Wealth Is Lost by Stopping SIPs?

The real power of SIPs lies in compounding. Interrupting this process leads to massive opportunity loss.

Consider an investor investing ₹5,000 per month with an average annual return of 12%:

• After 5 years: ~₹4 lakh

• After 10 years: ~₹11 lakh

• After 15 years: ~₹23 lakh

• After 20 years: ~₹46 lakh

If the investor stops the SIP after 10 years, they give up nearly 76% of the potential wealth they could have accumulated over 20 years. The most powerful phase of compounding begins in the second decade — a stage most investors never reach.

Missing the Market’s Best Days

Equity market returns are generated on a handful of strong recovery days. Studies show that missing just the 10 best days can cut returns by more than half. Missing the top 30 days can wipe out returns entirely.

This clearly proves that SIPs do not fail because markets underperform — they fail because investors exit too early.

The Bottom Line

The toughest time to continue investing is often the most rewarding one. Investors who stop SIPs for temporary comfort usually pay a permanent price. Staying disciplined, managing emotions, and focusing on long-term goals remain the key to successful wealth creation through SIPs.

Disclaimer: This article is for informational purposes only. Mutual fund investments are subject to market risks. Investors should consult a qualified financial advisor before making investment decisions.