If you’ve been investing consistently and suddenly see your SIP giving negative returns, don’t panic, it happens more often than you think. Market fluctuations, global events, interest rate changes, or temporary dips can make even well-planned investments look red. The real question is: How to Deal with Loss-Making SIPs in a rational, strategic, and long-term way?
Why SIPs Show Negative Returns
Systematic Investment Plans (SIPs) work on the principle of rupee-cost averaging, meaning you buy more units when the market dips and fewer when it rises. But in the short term, SIPs can still show losses. Here’s why:
- Short-term market volatility: Equity SIPs fluctuate all the time.
- Investing during market peaks: If your SIP started just before a market correction, temporary losses are expected.
- Wrong expectations: SIPs are not designed for quick profits.
- Global uncertainties: Inflation, wars, elections, and interest-rate moves affect markets.
Temporary losses don’t mean you made a bad investment — they simply mean your SIP needs time.
Should You Stop Your SIP?
One of the biggest mistakes investors make is pausing or stopping their SIP during a downturn. In reality, a market dip is the best time for SIP performance because you buy more units at lower prices.
Stopping your SIP in a downturn = buying high, not low.
Instead of pausing, re-evaluate the following:
- Is your fund’s long-term performance strong?
- Does your SIP align with your risk profile?
- How long is your investment horizon?
If everything checks out, continue investing.
5 Smart Ways to Handle Loss-Making SIPs
1. Check the Fund’s Long-Term Record
Assess the fund’s returns over 5–10 years. A short-term dip doesn’t decide future performance. Compare it with the benchmark and similar funds.
2. Increase SIP During Market Dips
If your income allows, increase your SIP amount. This accumulates more units at discounted prices, improving long-term wealth creation.
3. Stay Invested for at Least One Market Cycle
Equity SIPs generally need 5–7 years to deliver meaningful returns.
Short-term losses become irrelevant when the market rebounds.
4. Review Asset Allocation
Sometimes the issue is not the SIP, but your overall portfolio mix.
If your equity allocation is too high, adding debt or hybrid funds can stabilize returns.
5. Avoid Emotional Decisions
Investing based on fear leads to loss. SIP investors who stayed invested through market crashes historically ended up with higher returns than those who withdrew early.
Table: What to Do When Your SIP Is in Loss
| Situation | SIP Showing Loss Because… | What You Should Do |
|---|---|---|
| Market is down | Short-term volatility | Continue SIP, consider increasing amount |
| Fund underperforms benchmark | Poor fund management | Switch to a better fund but stay invested |
| Fund is new | Not enough time to stabilize | Wait at least 2–3 years before judging performance |
| You started during a peak | High NAV entry | Keep investing to average out your cost |
| Portfolio too risky | Overexposure to equities | Rebalance with debt or hybrid funds |
When Should You Consider Switching Funds?
A loss-making SIP doesn’t automatically mean you should switch funds. Consider switching only if:
- The fund has consistently underperformed its category for 2–3 years.
- The fund manager or strategy has changed drastically.
- Your goals or risk appetite have shifted.
- The benchmark has significantly outperformed the fund.
If switching, use a systematic transfer plan (STP) instead of withdrawing everything at once.
Why Staying Invested Works
Historically, markets always recover from crashes — sometimes slowly, sometimes rapidly. SIPs work best when you stay invested across market cycles.
When the market rises again, the units you accumulated during dips grow significantly in value.
Example:
An SIP started before the 2020 crash looked terrible in March–April 2020. But within a year, those SIPs delivered some of the strongest returns ever.
This is exactly why SIPs are long-term tools.
The Mindset Needed for SIP Success
To succeed with SIPs, develop these habits:
- Think in years, not months.
- Expect volatility — it’s normal, not scary.
- Focus on goals, not NAV fluctuations.
- Review your SIP once every 6–12 months, not every week.
Managing emotions is just as important as managing money.
Conclusion
Seeing your SIP in loss can feel frustrating, but it’s often temporary and normal. Instead of panicking, review your fund, adjust your strategy if needed, and stay invested with discipline. With the right mindset and approach, you’ll know exactly How to Deal with Loss-Making SIPs, and eventually turn those temporary losses into long-term gains.
