Aug 12, 2023 5 min read

Can SIP go in Loss?


A systematic Investment Plan (SIP) allows you to invest a specified amount in a Mutual Fund plan at regular intervals, such as once a month or once a quarter. Best SIP plans involve investing little money over time rather than a large sum, which results in a better return.

Whether a SIP can incur a loss depends on the performance of the mutual fund in which the SIP is invested. If the value of the mutual fund’s units decreases due to market conditions the SIP investment will also show a loss. Investing in the stock market or mutual fund always carries a certain level of risk, and the value of investments can fluctuate, resulting in losses.

However, the SIPs are considered a disciplined and long-term investment strategy. They allow investors to benefit from rupee cost averaging, where they buy more units when prices are low and fewer units when prices are high. If SIP really has losses let’s figure it out.

Market Risk

In every ad or mutual fund scheme at the last, they say Mutual Funds are subjected to market risk. What does that mean this depends on the market and how it acts, your SIP may decline and you might end up with a value less than what you invested.Investing in things like stocks comes with natural risks because prices of financial instruments can fluctuate due to various factors such as economic conditions, geopolitical events, and company-specific developments. Sometimes investors can see a volatile market and risk of losing money.

Market Liquidity Risk

Liquidity risk refers to the ease with which an investment can bought or sold in the market without affecting its price. Some investments may have lower liquidity, meaning there may be fewer buyers or sellers, which can lead to challenges in executing trades at desired prices. This can result in higher transaction costs and potential difficulty in accessing invested funds quickly.


When interest rates go up or down, it can affect how much certain investments are worth. For example, bond prices tend to move inversely to interest rates. When interest rates rise, the prices of existing bonds may fall, and vice versa. Investments like bonds, their value can change based on what’s happening with interest rates. So, if rates go up, the value of existing bonds may go down, and this can impact how well your overall investment plan is doing.

Patient or Disciplined Redemptions

This point suggests the importance of having a well-thought-out and disciplined investment strategy. Making decisions based on feelings, like quickly selling investments when the market is not doing well, might not be the best choice. It can lead to results that are not as good as they could be. It’s better to take your time and think carefully before making big decisions about your investments, especially when the market is going through a tough time.

Rupee Cost Advantage

The major goal of SIP investing is to generate profit from the falling market. Rupee cost averaging is a strategy employed in systematic investment plans (SIPs), where investors contribute a fixed amount at regular intervals, regardless of the market conditions this approach allows investors to buy more units when prices are lower and fewer units when prices are higher. Over time, this strategy aims to reduce the impact of market volatility and potentially enhance returns.

Let’s understand with a simple example-

Imagine a conversation between you and your father about your salary investments

You: Hey, Dad I have something going on my mind.

Father: Go on, what is it tell me?

You: Well, I used to invest directly in individual stocks, always trying to catch the next big thing. But it got so stressful, and I couldn’t focus on anything else. So, I switched to Systematic Investment Plans (SIPs) in a mutual fund scheme last year, thinking it would be less hectic.

But guess what? All my SIPs are showing negative returns of 12% over the past year. I thought SIPs were supposed to be safe and protect me from losses.

Father: MyBoyit’s not that simple. SIPs are a good way to spread out your investments over time, but they don’t guarantee you won’t face losses, especially if the market isn’t doing well.

You: I get it, but why are my SIPs not performing as expected?

Father: Well, if the market is down when your SIPs are being invested, it can affect the overall performance. In one duration fund will perform well but in the second duration, it might not perform well. Also, the type of funds you choose matters. If you only pick funds that are in high-risk sectors, you might see more fluctuations.

You: So, I stop SIPs altogether?

Father: Not necessarily, SIPs are a long-term strategy. The cost averaging in SIPs works best when markets are down because you get more units for the same amount of money.  What you can do is review your fund choices. Maybe diversify a bit and choose funds that match your risk tolerance.

You: Got it Dad I will reconsider my fund choices and stick to the long-term plan. Thank you!

Father: No problem son, investing is like cooking the right ingredients and patience leads to a great dish, so sometimes, you just need to add a pinch of risk to make it more exciting!

Watch More - The Mutual Fund Talk


Exploring online SIP investing promises a dynamic approach to wealth creation. While acknowledging the potential for market induced fluctuations and losses, our guide underscores the resilience of Systematic Investment Plans (SIPs) in the face of uncertainties.

Online SIP epitomizes a disciplined, long-term investment strategy, leveraging the power of rupee cost averaging. By understanding market risks, liquidity considerations, and the impact of interest rate fluctuations, investors can strategically navigate the financial landscape, armed with knowledge and a strategic approach, investors can harness the true potential of SIPs. The disciplined and long-term nature of online SIPs aligns with the principle of rupee cost averaging, allowing individuals to navigate the volatility of the market with prudence. The very essence of SIPs lies in the patient and disciplined commitment to a well-thought-out investment strategy.

Read MoreIs SIP good for 1 year ? SIP - One Year Benefits 2024

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