The market is down. Your portfolio is in red. And suddenly, that monthly SIP deduction feels less like discipline and more like a mistake.
You start wondering: Should I just pause it for now at least until things “settle down”?
It sounds logical. It feels safe. But it may also be one of the costliest decisions you make as an investor.
At first glance, a crashing market looks like the worst possible time to keep investing. But that instinct often misreads what a SIP is designed to do.
“Honestly, this is one of the most misunderstood things in personal finance. , in fact, mathematically, a crisis is the best thing that can happen to a long-running SIP,” says Divam Sharma, CEO of Green Portfolio, a SEBI-registered Portfolio Management Services (PMS) firm.
When markets fall, your fixed monthly investment buys more units. That’s rupee cost averaging quietly working in your favour, even when everything feels uncertain.
The problem, Sharma explains, is not the strategy but the timing of judgement. “The perception of underperformance comes from investors looking at their portfolio value at the worst possible moment — right in the middle of a crash — and concluding the strategy has failed. But that’s like judging a cricket match at the end of the 10th over. The game isn’t over.”
If there’s one lesson markets have repeated over time, it’s this:
During the 2008 financial crisis, the Sensex fell from around 21,000 to nearly 8,000. In March 2020, it dropped sharply again in a matter of weeks. Fear was everywhere.
But not everyone reacted the same way.
“Imagine two investors, both running a Rs 10,000 monthly SIP. One panicked and stopped. The other did nothing. Same market, same crash — completely different outcomes,” Sharma explains.
The one who stayed invested kept buying units at lower prices — prices that, in hindsight, were rare opportunities. When markets recovered, those investments turned into meaningful wealth. The one who exited missed that entire phase.
“The SIP didn’t fail them. They abandoned the SIP. The crisis wasn’t the problem. The behaviour was.”
Stopping a SIP during a downturn feels like damage control. In reality, it often locks in the damage.
“When you redeem during a crash, you’re crystallising a notional loss into a real one,” Sharma says. “Your portfolio was down on paper — the moment you redeem, that loss becomes permanent.”
There’s a second, less visible cost. Once you exit, you have to decide when to return.
“And almost nobody re-enters at the bottom. People wait for ‘stability’, which usually means they re-enter after markets have already recovered 20–30%. So they’ve sold low and bought high.”
That gap, between and reacting emotionally, doesn’t just hurt in the short term. Over years, it compounds into a significant difference in wealth.
Market declines trigger fear. And
But Sharma points out that this reaction directly clashes with how SIPs are meant to work.
“A falling market is precisely the environment SIPs are designed for. When the NAV (Net Asset Value) is lower, your fixed amount buys more units. When the market recovers, those extra units multiply in value.”
Stopping your SIP at that moment means missing out on the very phase that drives long-term gains.
He puts it in everyday terms: “If your favourite brand was selling at half price, you’d stock up. When the stock market goes on sale, people do the opposite. They run away.”
One of the biggest misconceptions investors carry is that steady, linear growth equals success. Equity investing doesn’t work that way.
“The returns from a SIP don’t come evenly distributed across time,” Sharma explains. “A disproportionate share comes from a small number of recovery days and months that follow major corrections.”
This is often called the “best days” effect. Miss those few crucial periods, and overall returns drop sharply.
“Those best days almost always come right after the worst phases. The people who exit during the crash miss the recovery entirely.”
In other words, volatility isn’t the enemy. Reacting to it is.
Not always, but
“If you’ve genuinely lost your income or are dealing with a financial emergency, pausing a SIP is absolutely the right call,” Sharma says. “An investment strategy that puts you under financial distress is not a good strategy.”
Similarly, if your financial goals or timelines have changed, adjusting your investments makes sense.
But stopping because markets are falling?
“That’s an emotional decision, not a financial one. There’s a big difference between ‘I can’t afford this right now’ and ‘I’m scared right now.’”
In theory, continuing a SIP through market cycles sounds straightforward. In practice, it tests patience.
That’s where discipline matters more than strategy.
“Automate everything,” Sharma suggests. “Set up your SIP so it goes out before you can think about it. Automation is the single most powerful tool against behavioural mistakes.”
He also advises reducing exposure to daily market noise. “Checking your portfolio every day during a crash serves no purpose except to spike anxiety and trigger bad decisions.”
And for those who can manage it, downturns may even offer opportunity. “If you have the liquidity, increase your SIPs during crashes, don’t stop them. You’re getting more for every rupee.”
In other words, market crashes are inevitable. Recoveries, historically, have followed. The real question isn’t whether markets will bounce back. It’s whether you’ll still be invested when they do.
Because in the end, as Sharma puts it simply, “Time in the market beats timing the market. Every single time.”