Nifty and other market indices recently touched all-time highs. In the past few weeks, markets have stayed flat or volatile. In times like these, a market crash is always at the back of investors minds. There is a general belief among investors that the market has run up too quickly and is bound to correct or soon. If you are among the lot contemplating giving a pause to your equity SIPs, you should read this.

“Far more money has been lost by investors preparing for corrections or trying to anticipate corrections than has been lost in corrections themselves”

Peter Lynch

Let’s understand the financial consequences of stopping SIPs with an example.

Assume, you have been investing in BSE 100 index since 1999-2000. However, you paused your SIPs into equities whenever the market was up by 50% or there was a market crash of at least 25% in a financial year. Since 1999-2000, eight of 23 years were such years.

So, let assume that in such years, you take a SIP pause for three months. So, instead of investing for 12 months, you invest only for nine months.

Here are the two scenarios

Scenario 1 – You don’t pause your investments and continue to invest regardless of market conditions.

In this case, a Rs 3 lakh annual investment into BSE 100 would yield Rs 4.1 crore over a period of about two decades.

Scenario 2 – You temporarily pause your investments. Rs 3 lakh investment reduces to Rs 2.25 during times of unusual rise or fall of markets. In this case, your portfolio grows only to Rs 3.6 crore – 11% lesser than if you did not time the market.

BSE 100 Returns (percentage)

How did this happen?

Take, for instance, the period 1999-2000 when markets were up by 76%. Thinking that the market is heated up or there will be a market crash, you might have paused your investments. Over the short term, this strategy worked out, as in the next year, markets were down by 42%.

So, investing lesser saved you a bit and report higher portfolio returns.

However, regular SIP investors also managed to accumulate more units (or shares) at lower valuations when markets were down. And these investments over a period of time gave them more absolute returns than sitting-on-the fence.

Let’s assume, you have 20 more years to retire. At a conservative return estimate of 10% annually, the above-mentioned portfolio difference would increase to about Rs 2.9 crore – thanks to the power of compounding.

So, don’t anticipate or prepare for corrections. Rather focus on the financial goal and work towards achieving them.

What if you miss out on the best (return) days?   

Interestingly, a 30-year study by Motilal Oswal MF of ‘best days’ in terms of returns shows that more than 50% of best days occurred during a bear market phase.

And what if you missed some of it in your quest to time the market?

If you were to invest in Nifty 50 three decades back, your portfolio will now be 31 times that. However, if you miss the best 10 days, your portfolio will be only 11 times. If you missed the best 20 days, it’s even lower at 6 times and 3 times if you miss all the best 30 days.

In other words, there is a 10X difference in portfolio value on missing the best 30 days of the market.

It indicates that we can’t stop investing just because the bear phase has set in the market. The market is expected to give 10-12% annual returns to patient investors over the long term. So, rather than trying to time the market, stay put.

There are a couple of things investors could do:

Asset allocation

Check if your asset allocation is off-balance. This could be a good time to prune equity exposures. Also, if you are on the verge of retirement, it might be better to pare exposure to equities and reduce the sequence risk. However, if you have five years or more, then gradually scale down the equity exposure.

Think long-term

Waiting for a pullback in markets isn’t going to move the needle that much especially over the long term. In fact, much is lost by staying on the sidelines. So, don’t pause your investments that can only delay the achievement of your goals or gets unnecessarily spent.


Equity markets have weathered all types of crisis – be it that of internet bubble burst, WTC attack, Lehman crisis or COVID – to give double-digit returns to their investors. Keep the faith in equities and stay invested.        

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