Pausing SIP or exiting funds today? It can erase 9% returns

Summary: Think pausing your SIP or exiting your investments during a market fall is harmless? You could be giving up 9 per cent returns. Sure, every correction feels different. But the mistake investors make in every correction is the same: trying to time it. This piece breaks down the real cost of exiting too soon — and how rupee cost averaging quietly compounds your wealth.

On Thursday, the Sensex opened 600 points lower, shedding over Rs 5 lakh crore in notional investor wealth after US President Donald Trump imposed a 25 per cent tariff on Indian goods starting August 1, 2025. Couple that with the Indo-US free trade deal hanging in limbo and foreign investors continuing to pull out money, and volatility is expected to rule the charts for the next few weeks.

In moments like these, panic feels like the rational thing to do. That urge to exit your equity mutual funds or hit pause on your SIPs? It’s understandable. But here’s the paradox: The price of avoiding pain in the market is often missing out on the gain.

The costly penalty of missing the market’s best days

Our guest columnist Shyamali Basu summed it up beautifully in a recent piece: “If we study the Sensex from January 1990 to March 2022, it delivered an annualised return of 13.71 per cent. But if you missed just the 40 best days in that 32-year window, your return dropped to 4.5 per cent.”

That’s a drop of over 900 basis points, because of just 40 days.

And research from JPMorgan Asset Management shows this is no fluke. Their US-based data, covering the S&P 500 from 2005 to 2024, revealed the same trend:

• Staying fully invested for 20 years turned $10,000 into $71,750, at an annualised 10.4 per cent return rate.
• But missing just the 10 best days slashed that figure to $32,871, at 6.1 per cent.
• Missed out on the 20 best days? Your money would have grown at just 3.5 per cent.

And it gets worse if you thought you could time the market. Because seven of the market’s 10 best days occurred within just two weeks of the 10 worst days. In other words, if you flee during crashes, you’re likely to miss the rebound too.

“But what if this time it’s different?”

That's the siren song investors hear every time the market wobbles. Trade wars. Covid. Interest rates. Budget jitters. Elections. Geopolitical tensions. There's always a reason to worry.

But there's also a reason why staying invested beats trying to time the market, because the market is forward-looking, fast-moving and brutally unpredictable. As JPMorgan’s Jack Manley says: “When there’s a bad sell-off, that bad sell-off is typically followed by a strong bounce back.”

Our take

Many investors have been enamoured by the correction obsession. They always expect a better entry after the “next crash”. They end up sitting on cash for months, waiting for a correction.

And even if they correctly anticipate a correction, they don’t know when to enter. They wait for the bottom, miss the recovery and never buy.

In simple terms, corrections are normal. The opportunity isn’t in predicting them; it’s in consistently investing through them, which is one of the biggest draws of SIP (Systematic Investment Plan) investing. By putting in a fixed sum regularly — regardless of whether markets are high or low — you stop trying to time the market. Instead, you benefit from rupee cost averaging.

Here’s how that works:

• When markets are down, your SIP buys more units for the same amount.
• When markets are up, it buys fewer units.
• Over time, this averages out your cost of purchase — and ensures you never “miss the bottom” or “buy the top”.

Most importantly, this approach builds discipline, habit and long-term compounding, the real drivers of wealth.

So, if you're already investing through well-chosen funds, don't let headlines derail your strategy. And if you're still looking for the right funds to stay invested in for the long haul, we can help with that too.

Want to cut the noise and focus on the right investment strategies?
Read Mutual Fund Insight. It’s not just another personal finance magazine; it’s your monthly guide to investing with clarity, conviction and confidence.

In a world flooded with hot takes, trending stocks and daily market noise, Mutual Fund Insight stands out by doing what truly matters:

• Deep mutual fund analysis: No jargon. Just clear, data-backed views on which funds deserve your money and why.
• Real investor stories: Learn from the wins and mistakes of everyday investors who’ve walked the talk.
• Exclusive fund manager interviews: Go behind the scenes with India’s top fund managers and understand how they think.
• Actionable advice: Whether you're building wealth, planning retirement or saving tax, we give you the roadmap — not just the headlines.

If you’re the kind of investor who values insight over noise, long-term thinking over short-term fads, and real strategies over hype — this magazine is for you.

Subscribe to Mutual Fund Insight

This article was originally published on July 31, 2025.