Market volatility often prompts investors to rethink their investment decisions, including whether they should pause their systematic investment plans (SIPs) until markets recover.
According to mutual fund industry experts, there are situations where pausing a SIP is justified, but market corrections alone are generally not one of them. Instead, they say the decision should be based on changes in an investor’s financial circumstances rather than fluctuations in the equity market.
Financial emergencies may justify a SIP pause
A common thread across experts is that a SIP should not become a financial burden. If an investor is facing a genuine cash-flow crunch, pausing investments may be the more prudent choice.
Varun Gupta, CEO of Groww Mutual Fund, says temporary job or income loss, a medical emergency or any unforeseen cash-flow disruption are legitimate reasons to pause a SIP. However, he stresses that a SIP should ideally be viewed as a long-term commitment rather than a tactical tool.
Aditya Mulki, CEO of Navi AMC, echoes the view. Investing, he says, should never come at the cost of meeting essential financial obligations or maintaining an emergency cushion. If an investor’s financial circumstances have changed, pausing a SIP can be a sensible and responsible decision. “The decision to pause a SIP should be driven by changes in your personal finances, not by short-term market performance,” he says.
Manish Srivastava, Executive Director at Anand Rathi Wealth, says preserving financial stability should take priority during periods of genuine financial stress. However, he advises investors to resume their SIPs as soon as their financial situation stabilises so they remain on track towards their long-term goals. He also recommends maintaining a dedicated emergency fund so temporary setbacks do not force investors to interrupt long-term wealth creation.
Why market corrections are usually the wrong reason to stop investing
While financial emergencies may justify a pause, experts caution that stopping SIPs because markets have corrected often works against the very purpose of systematic investing.
Gupta says market volatility and corrections are an inherent part of equity investing and often provide an opportunity to accumulate more units at lower prices. One of the biggest mistakes investors make, he says, is treating market corrections as a signal to stop investing or assuming recent market movements will continue indefinitely. He also cautions against trying to time the market by pausing SIPs during corrections and restarting after markets recover, as investors often miss the initial phase of the rebound.
Mulki says investors frequently underestimate the opportunity cost of pausing SIPs. Market corrections, he says, allow investors to accumulate more units for the same investment amount, strengthening the benefits of rupee-cost averaging over the long term. Trying to stop and restart SIPs based on market movements effectively turns investing into a market-timing exercise, which requires getting both the exit and re-entry decisions right, something that has historically proved difficult.
Kaustubh Belapurkar, Director, Morningstar Investment Research, says investors also tend to overreact to short-term underperformance in individual funds. Even well-managed funds can go through phases of relative underperformance because of market rotation or style headwinds. As long as there has been no change in the investment team or investment process, he says, investors are generally better served by continuing their SIPs instead of reacting to temporary performance.
Bhalchandra Joshi, Chief Business Officer and Chief Operating Officer at The Wealth Company Mutual Fund, says another common mistake is pausing SIPs because of market headlines rather than because something has changed in one’s own financial life. He notes that investors often fail to plan how they will restart their SIPs. If a pause becomes unavoidable, it should ideally be accompanied by a review date or a clear trigger for resuming investments; otherwise, what begins as a temporary pause can quietly become a permanent break in the investment habit.
Experts also advise investors to have a plan before market volatility strikes. Mulki recommends deciding in advance the situations that would genuinely justify pausing a SIP, while Belapurkar suggests keeping long-term financial goals and intended asset allocation in focus during periods of uncertainty.