How to reduce SIP loss probability: Stay invested

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Key points

• (Catch all the Mutual Fund News, Breaking News, Budget 2024 Events and Latest News Updates on The Economic Times.).
• Over the past 20 years, two-year annualised SIP returns in the Nifty 500 TRI have fallen below 5% on more than 25% of occasions.
• Understanding business to figure out the mystery: Power Grid Corp – Part 1.
• For the cohort that began with negative returns after the initial two years, a massive 53% of occurrences eventually delivered an annualised return of between 15% and 20%.
• The Economic Times daily newspaper is available online now.

Nifty23, 897.7024.25. Gold (MCX) (Rs/10g.)155, 037.00-738.0. The Economic Times daily newspaper is available online now.

SIP losses in the first two years? Staying invested for five years can reduce loss probability to zero: Report.

SIP losses in the first two years? Staying invested for five years can reduce loss probability to zero: Report. ET OnlineLast Updated: Sep 04, 2026, 05: 17: 00 PM IST.

In practice, a subdued start does not necessarily mean an SIP will deliver poor long-term returns. A 20-year analysis by ShareMarket by PhonePe demonstrates that most five-year SIPs recovered from fragile or negative returns in the first two years, with almost 69% eventually delivering double-digit annualised returns. The data additionally highlights how extending the investment horizon to seven or 10 years can significantly reduce loss risk and improve return consistency, underscoring the importance of patience and compounding in equity SIPs.

Early underperformance need not be a reason for investors to exit their mutual fund SIPs. Data from the past 20 years demonstrates that seven out of 10 five-year SIPs delivered double-digit annualised returns even when markets experienced fragile or negative returns during the first two years, according to a report by ShareMarket by PhonePe. The report further highlighted that analysing two decades of data ending June 2026 reassures investors that the short-term SIP sluggishness experienced lately is not uncommon, and extending the investment horizon can drastically improve outcomes. MF Tracker: HSBC Midcap Fund turns Rs 10, 000 SIP to over Rs 2 crore, emerges 3-year topper with 24% return.

Over the past 20 years, two-year annualised SIP returns in the Nifty 500 TRI have fallen below 5% on more than 25% of occasions. If an investor's SIP generated negative returns in the initial two years, continuing for a total of five years reduced the likelihood of losing funds to zero. In almost 69% of these cases, the 5-year annualised return rebounded into double digits. The report further highlighted that extending the SIP for three more years (after the initial two years of dismal performance) allowed the Rupee Cost Averaging mechanism to work its magic. Live Events.

For the cohort that began with negative returns after the initial two years, a massive 53% of occurrences eventually delivered an annualised return of between 15% and 20%. More importantly, the returns have never been negative for these investors if they continued their SIP till year five. Investors who saw marginal 0% to 5% returns early on, always concluded up with annualised returns above 5% if they continued their SIP for five years. In almost 72% of these scenarios, returns jumped into double digits. Anyone who had done an SIP in the market for seven or 10 years historically reduced capital loss risk to absolute zero. Over a 10-year period, SIPs delivered double-digit returns roughly 90% of the time. While a 5-year SIP can sometimes yield blockbuster returns of >20% (almost an 8% probability), a 10-year SIP strips away such extremes. By year 10, a massive 65% of the times the SIP returns have fallen strictly within the 10% to 15% return band. When combined with the 15% to 20% band (26%), a 10-year SIP has historically had a 90% probability of delivering double-digit annualised returns. "With recent market cycles, it is natural for investors to worry regarding short-term sluggishness in their mutual fund SIPs. Nevertheless, our study of SIP performance over the past two decades reinforces that the early years of a SIP do not dictate its final outcome, " stated Nilesh D Naik, Head of Mutual Funds at PhonePe. According to Naik further, by extending their investment horizon, investors allow the true power of compounding to take over. Furthermore, by evaluating funds on our CRISP parameters of Consistency, Risk, and Investment Style, we believe investors can build resilient portfolios that deliver reliable, long-term success. IEX shares rise 2% after electricity trading volume jumps 20% YoY to hit record high in August The report additionally highlighted that mutual fund SIPs in equities are not two-year products. They are structural wealth-building tools designed for longer horizons with patience. Judging an SIP's success or failure by its 24-month performance is like judging a marathon runner by their pace in the first mile. When critics label SIPs and mutual funds to be a "scam" during temporary downturns, staying rational is essential. Extending your time in the market isn't meant to remove all risk, but it drastically lowers the chance of failing to beat inflation. (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times) If you have any mutual fund queries, message ET Mutual Funds on Facebook/Twitter. We will obtain them answered by our panel of experts. Do share your questions at [email protected] along with your age, risk profile, and Twitter handle.

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Taken together, the developments around how to reduce SIP loss probability: Stay invested point to a situation that is still moving, and the coming days should bring more clarity.