SIP performance insights: Early investors see gains, recent ones face loss

As markets have experienced their ups and downs over the past few years, the performance of Systematic Investment Plans (SIPs) initiated from January 2021 to February 2025 reveals a distinct pattern. While investors who began their SIPs earlier in 2021 and 2022 have seen positive returns, those who started their investment journey in the past 9 to 10 months are now facing negative returns, as per a study by Fisdom. 

 

Key Observations

Early SIP Investors (2021-2022): Investors who began their SIPs earlier in 2021, particularly in the small-cap and large-cap categories, are seeing notable gains. Returns as high as 20.6% have been recorded in small-cap stocks, while large-cap investors have earned up to 14.3% on their investments.

 

Recent SIP Investors (2023-2024): In contrast, those who began their SIPs later in 2023 and 2024 are experiencing negative returns. For example, the most recent SIPs (started in January 2025) have seen a decline of up to 27.1% in large-cap stocks, 56.4% in mid-cap, and 60.8% in small-cap. 

 

Market Cyclicality: This analysis reinforces the importance of a long-term investment horizon and highlights the cyclical nature of markets. Short-term losses, particularly when driven by market corrections, should not be a cause for concern for long-term investors. 

Source: Fisdom Research, Accord Fintech. All regular plans have been considered for computation. We have considered XIRR for the returns Computation. SIP returns data is the category average SIP returns for the given period.   

The Long-Term Benefit of SIPs

A deeper analysis of SIPs started after January 2018 (with a five-year investment horizon) further demonstrates the power of long-term investing. These SIPs have weathered market corrections and delivered positive results. 

 

Performance Over 5 Years (2018-2023) 

 

Performance of SIPs Started Post 2018 (For 5-Year Investment Horizon)

 

Large-Cap Category: The large-cap category has consistently delivered positive returns, with an average return of 16.2% for those who started SIPs in January 2020 and held them until January 2025.

 

Mid-Cap and Small-Cap Categories: The mid-cap and small-cap categories have also experienced solid growth, with small-cap returns peaking at 36.1% for those who started SIPs in July 2019.

 

Despite market downturns, such as the COVID-19 volatility in 2020, SIPs initiated in 2018 showed  recovery and growth by the end of 2023. Those who maintained their investments have benefited significantly from the subsequent market recovery.

 

The data from SIPs initiated post-2018 reflects the value of staying invested through market volatility. The compounding effect, combined with rupee cost averaging, has played a crucial role in reducing short-term risks and enhancing long-term returns.

 

In 2018, when many of these SIPs were started, the Nifty 100 TRI delivered a modest return of only 3%, while the Midcap and Smallcap indices were down by 12% and 26%, respectively. This scenario mirrors the current market correction, demonstrating that long-term SIPs can still yield substantial returns despite short-term market declines. 

Current SIP Trends and Investor Behavior

"An analysis of recent SIP data suggests that a significant number of investors are discontinuing their SIPs before tenure completion. If investors are discontinuing their SIPs simply due to short-term negative returns rather than their investment goals being met; they might be making a mistake. Instead of stopping SIPs during corrections, this could actually be the best

time to continue investing systematically and take advantage of lower valuations," noted Fisdom in its report. 

Key Takeaways for Investors

• SIPs Work Best in the Long Run: Short-term volatility may result in negative returns, but over a longer period, equity markets tend to generate wealth.

• Staying Invested is Crucial: Exiting during market corrections locks in losses and prevents investors from benefiting from eventual recoveries.

• Market Timing is Irrelevant in SIPs: Investing systematically ensures that investors buy more units when prices are low and fewer when prices are high, averaging out the cost over time.

• Diversification Across Market Caps Matters: While small caps have shown the highest volatility, they have also delivered superior returns in the long run.

• Historical Trends Support SIP Investing: The five-year analysis post-SEBI recategorization validates that disciplined SIP investing leads to wealth accumulation despite market fluctuations.