Investing Rs 25k monthly in SIP for 8yr but worried about a market crash wiping out gains. Should I stop?

The longer you stay invested in an index like the Nifty the historical probability of loss drops to zero over a 10yr period. Stock market returns are lumpy and spiky over short periods. If you invest for a single day the probability of seeing a loss is about 45%.

Over a 1yr SIP duration you could experience a negative return of up to 22%. But over a 10yr period that historical risk of loss drops to zero. Imagine the market goes from Rs 100 to Rs 150 over 5yr.

In a flat market scenario the market goes sideways and dips slightly and stays flat for years before spiking to a 50% gain in the final year. You spend years accumulating a large volume of cheaper units. When the market finally rallies you make significantly more money.

Sideways and down markets are actually highly beneficial for SIP investors. Imagine investing diligently via SIP for 8 or 9yr only to be hit by a major market crash like the pandemic. During the depths of the crash your portfolio CAGR would have plummeted to between 2% and 3%.

This is essentially a break-even scenario after years of discipline. But if you held on and looked back a few years later that CAGR would have bounced back to a healthy 12%-13%. Volatility exists even in the long term and investors must be mentally prepared to weather it.

Disclaimer: All information shared above are strictly for educational and informational purposes only. It should not be construed as financial or investment advice.