Why Do Most Investors Quit SIPs Before Compounding Truly Begins?
Everyone talks about starting a ₹10,000 SIP. Very few talk about staying invested for 15–20 years. The real wealth in equities is not created in the first year, or even the fifth. It is created in the years when most investors have already exited.
Recent industry data indicates that SIP stoppage ratios have risen sharply. In one recent month, over 50 lakh SIPs were discontinued while only about 40 lakh new ones were started. That means more SIPs were being stopped than started. For every 100 new SIPs, roughly 127 were discontinued.
This is not a market problem. This is a behavioural problem.
Understanding the 8-4-3 Rule of Compounding
Compounding in long-term investing often follows what can be called an 8-4-3 structure in a 15-year journey.
First 8 Years: Foundation Phase Growth feels slow. Returns appear modest. Markets fluctuate. Portfolio charts do not look impressive. Most investors feel “nothing is happening.”
Next 4 Years: Acceleration Phase Returns begin generating returns. The compounding engine gains speed. Portfolio values start showing meaningful expansion.
Final 3 Years: Exponential Phase The portfolio can expand dramatically because the base capital is now large. Growth appears explosive. This is when compounding visibly rewards patience.
The tragedy is simple. Many investors quit in year 2, year 3, or year 5 — right before the acceleration phase begins.
The Mathematics of Patience
| Investment | Return Assumption | Value in 5 Years | Value in 20 Years |
|---|---|---|---|
| ₹1,00,000 | 12% CAGR | ~₹1.76 lakh | ~₹9.64 lakh |
At 12% annual growth, ₹1 lakh becomes ₹1.76 lakh in five years. That feels underwhelming to many investors. But in 20 years, the same capital becomes nearly ₹9.64 lakh.
The difference is not in the return rate. The difference is in time.
Why Investors Quit Too Early
Market dips, short-term volatility, and lack of visible progress in early years trigger emotional exits.
Common behavioural triggers include:
- Temporary market corrections
- Peer comparison pressure
- Short-term liquidity needs
- Expectation of quick returns
- Overexposure to financial news noise
The early phase of compounding is quiet. It does not look exciting. That boredom drives exits.
Disciplined investors understand one principle: compounding rewards consistency, not excitement.
For structured index participation strategies aligned with disciplined investing:
India’s Current SIP Landscape
High SIP stoppage ratios suggest investors are reacting to short-term volatility rather than long-term goals.
Equity markets naturally move in cycles. Volatility phases often coincide with global uncertainties, policy shifts, or liquidity changes. However, long-term economic growth trends in India remain structurally supported by demographics, digitisation, manufacturing push, and infrastructure expansion.
Stopping SIPs during volatile periods interrupts the compounding cycle at its most crucial stage — accumulation at lower valuations.
Compounding Is Psychological, Not Mathematical
Most investors understand CAGR. Few understand emotional endurance.
The real equation of wealth creation is:
Consistency + Time + Discipline = Compounding Power
Markets do not reward early enthusiasm. They reward sustained participation.
Practical Lessons for SIP Investors
- Avoid stopping SIPs during corrections unless fundamentals change.
- Increase tenure expectation to 15–20 years, not 3–5 years.
- Align SIP amount with income stability to avoid forced exits.
- Reduce noise consumption during volatile phases.
- Review annually, not monthly.
The first 8 years are not meant to impress you. They are meant to build your capital base.
The last 3 years are where exponential growth becomes visible. Unfortunately, most investors never reach that stage.
Investor Takeaway
The SIP conversation should shift from “How much to start?” to “How long can you stay?” Compounding does not reward activity. It rewards endurance.
Market volatility is temporary. Compounding discipline is permanent. The investors who stay invested through the silent years are the ones who experience exponential outcomes.
As Gulshan Khera often emphasises in disciplined wealth creation strategies, patience is not optional in equities — it is foundational.
Read structured investment insights at Indian-Share-Tips.com, which is a SEBI Registered Advisory Services.
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
