Indians have traditionally been conservative savers, preferring to park the bulk of their money in low-risk bank deposits. Then came the Association of Mutual Funds of India (AMFI) with its ubiquitous campaign: Mutual Funds Sahi Hain.
Time and again, television commercials and newspaper advertisements reinforced the message that mutual funds are the optimal vehicle for long-term financial planning and retirement. It clicked. Today, some Rs29,000 crore flow into the mutual fund industry every month via systematic investment plans (SIPs) alone.
In November 2025, SIP contributions reached Rs29,445 crore—a seven-fold increase from the Rs3,884 crore recorded in November 2016. Retail interest, particularly in equity schemes, has surged. According to AMFI data, 4.66 crore new SIPs were registered between April and November 2025.
This influx is occurring despite significant market turbulence. Since October 2024, equity markets have been extremely volatile; while the benchmark BSE Sensex and NSE Nifty 50 touched record highs, the broader mid-cap and small-cap indices delivered negative returns in 2025.
A worrying trend lies beneath the headline growth numbers. Even as the SIP book expands, the ‘SIP stoppage ratio’ remains stubbornly high. This metric compares the number of SIPs discontinued (or matured) against new registrations in a specific month.
In November, while 57.14 lakh new SIPs were registered, 43.18 lakh were discontinued or matured. This translates to a stoppage ratio of approximately 75.5 per cent. The trend is consistent; October saw a similar ratio, and in September, it hovered just above 76 per cent. If this ratio were to breach 100, it would signal a contraction.
Despite this churn, the industry remains robust. Venkat Chalasani, CEO of AMFI, noted that the industry’s assets under management (AUM) crossed the Rs80 lakh crore mark in November. “SIP assets rose to Rs16.53 lakh crore, now contributing to one-fifth of the industry’s total AUM, indicating that investors remain committed to disciplined, long-term investing,” he said.
Financial planners, however, argue that commitment is exactly what is lacking for many. Mutual fund investing is a long-term game, yet data suggests many Indians are exiting before the benefits materialise.
A 2023 survey by Axis Mutual Fund revealed that 48.7 per cent of equity investors stay invested for two years or less. Another 22.2 per cent exit within just one to two years. A separate study indicated that only 11 per cent of SIP accounts remain active for more than five years.
The result is a disparity in wealth creation: while the markets have grown multi-fold, investors who redeemed early or switched frequently settled for significantly lower returns.
Ankit Patel, co-founder and partner at the wealth management firm Arunasset, attributes the high churn partly to the rise of direct equity investors. “Around 40 per cent of SIP accounts today are in direct mode, and nearly 47 per cent of the industry’s AUM sits there. Hard data suggests that a disproportionate share of SIP closures, shorter holding periods, and portfolio churn originates from this segment,” he said.
Experts point out that while onboarding has become digital and seamless, investors often lack the necessary ‘hand-holding’ during periods of lacklustre returns. “In volatile phases, numbers by themselves rarely persuade investors to stay put,” Patel said. “Investing is as much about managing emotions as it is about managing money. What ultimately matters is discipline and reassurance. When that support is missing, many investors respond to short-term market noise, discontinue SIPs prematurely, and end up hurting their own long-term outcomes.”
Compounding this issue is the industry’s tendency to launch new schemes constantly, which, coupled with changing market outlooks, often nudges investors to churn their portfolios unnecessarily.
An analysis by FundsIndia of actively managed diversified equity funds with a 15-year history offers a reality check. It showed that funds which outperformed the market over the long term still underperformed 39 per cent of the time over a one-year period. Even over a three-to-five-year horizon, these top funds underperformed one-third of the time.
Jiral Mehta, senior manager of research at FundsIndia, advised a minimum investment horizon of seven years. “Longer timeframes allow enough time for recovery from large market falls,” she said. “Historically, a seven-plus year timeframe helps you minimise your odds of negative returns—there were no occurrences in the last 25 years—and increases your odds of better returns of over 10 per cent CAGR.”
Patel agreed, emphasising that compounding is heavily “back-loaded”. “For the first few years, the numbers barely move. If you simply stay put, the curve finally starts to bend in your favour. Exit in year two or three, and you have gone through the stress but walked out before the payoff,” he said.
To maximise wealth, Mehta suggested investors should not only stay the course but also increase their SIP amount annually. “Even a small increase every year can make a huge difference to your final portfolio value over the long run,” she noted.
Investors must accept that even the best actively managed funds will endure temporary periods of underperformance. Typically, these lulls are followed by phases of sharp outperformance that more than compensate for the wait—provided the investor is still there to reap the reward.