A SIP Does Not Remove Market Risk
Investing the same amount every month is genuinely useful, and what it is useful for is not what it is usually sold for. Run it across every period in the Indian record and the spread of outcomes is enormous — over five years the worst run lost money, and even over fifteen years two people doing precisely the same thing finished a long way apart.
Updated 10 September 2026
The claim being tested
A monthly investment plan is routinely described as a way of removing the risk of investing at the wrong moment. Because you buy at many prices rather than one, the argument goes, the price you paid stops mattering.
The first half of that is true and the conclusion does not follow. Buying at many prices removes the risk attached to one price. It does nothing about the risk attached to all of them, which is that the market can be lower at the end of your period than the average price you paid across it.
This page measures how much risk is left.
What was tested
The same amount into the index every month, held to the end of the period, with capital gains tax charged lot by lot when it is sold. Every period of a given length that our data allows, starting a new one each month, from 30 June 1999 to 31 August 2026.
The calculation is the steady arm of the experiment built for does buying the dip help. It is reused rather than rebuilt, so both pages describe the same investor with the same assumptions — a second implementation would eventually disagree with the first, and neither page would show a sign of it.
Returns are stated per year, after tax, before inflation.
The result
| Kept up for | Periods tested | Worst | Poor | Typical | Good | Best | Lost money | Beaten by cash |
|---|---|---|---|---|---|---|---|---|
| 5 years | 267 | -4.42% | +6.70% | +13.14% | +29.68% | +44.06% | 0.7% | 11.6% |
| 7 years | 243 | +0.40% | +7.86% | +12.68% | +22.74% | +36.72% | 0.0% | 6.2% |
| 10 years | 207 | +3.46% | +9.51% | +12.53% | +18.54% | +21.81% | 0.0% | 1.4% |
| 15 years | 147 | +6.22% | +10.81% | +12.46% | +14.77% | +16.45% | 0.0% | 0.7% |
| 20 years | 87 | +9.99% | +11.48% | +12.87% | +14.13% | +14.81% | 0.0% | 0.0% |
Start with the 5-year row, because it is the horizon most people actually have for most of their goals. Across 267 periods the outcome ran from -4.42% to +44.06% a year. 0.7% of those periods ended with less money than had been paid in, and 11.6% of them returned less than 7.2% a year — the average retail term deposit rate across the record. Those periods would have done better in a deposit, after all that market exposure.
Now the 20-year row, which is the one usually quoted. Nothing lost money. The range still runs from +9.99% to +14.81%.
Show these numbers as a table
| Strategy | Poor outcome | Typical | Good outcome |
|---|---|---|---|
| Kept up for 5 years | +6.78% | +13.14% | +29.68% |
| Kept up for 7 years | +7.86% | +12.68% | +23.53% |
| Kept up for 10 years | +9.54% | +12.53% | +18.54% |
| Kept up for 15 years | +10.85% | +12.46% | +14.77% |
| Kept up for 20 years | +11.54% | +12.87% | +14.13% |
The bars narrow as the period lengthens, which is real and worth having. What they do not do is close. Even at fifteen years the best period turned the same contributions into 4.0 times what the worst did. Monthly investing narrowed the range in exactly the way that simply holding for longer narrows it — and for the same reason, which is time, not technique.
So what does a SIP actually do?
Three things, none of which is removing market risk.
It converts a decision into a habit. The largest cost most investors pay is not a bad entry price; it is the money that never got invested because each month needed a fresh decision, or because a fall made this month look like the wrong moment. A standing instruction removes the occasion for that. On this evidence that is the benefit worth paying attention to.
It matches how income arrives. Most people are not choosing between a lump sum today and monthly amounts; they are paid monthly and have nothing to deploy in one go. For them a SIP is not a strategy at all, it is simply the shape of the money.
And it reduces the damage a single unlucky date can do, which is a real if modest benefit and the only one of the three that resembles the usual sales pitch. It is bounded by arithmetic: after a few years of contributions, most of the money in the account was invested at prices set years ago, and the next contribution barely moves the average.
That last point has a consequence people rarely draw out. The protection is strongest when you have least invested and weakest when you have most. A SIP shelters you best in the years it matters least. By the time the account is large, its value moves with the market almost exactly as a lump sum would — the mechanism examined for the retirement case in sequence risk before and after withdrawals begin.
What this test cannot tell you
It is one index over one country's history. Everything on this page comes from a single broad equity index, measured on a total-return basis. It cannot speak to a fund, a different market, or a period longer than the record.
The periods overlap. The 147 fifteen-year periods in that row are not 147 independent observations; consecutive periods share nearly all their history. The counts describe how the test was run, not how much evidence it produced.
The cash comparison is a single rate, not a path. The "beaten by cash" column measures against the average deposit rate over the whole record, not against the rate available on each date. A saver does not earn an average — they earn whatever was on offer at the time — so this is a benchmark rather than a claim about what any particular deposit would have paid. The deposit rate has ranged widely: it was 5.1% in 2020-21 and 9.8% in 2000-01, so a period beginning at one end of that range is a very different comparison from one beginning at the other.
Tax is charged at redemption on the rules in our file, and the treatment of a sale falling exactly on the twelve-month boundary is a known open question recorded in our research register. It is flagged there rather than quietly resolved, because settling it by making our own code agree with itself would decide a statutory question without consulting the statute.
Nothing here is a comparison with lump-sum investing. That is a different question with a different experiment behind it, and the honest answer to it is not on this page.
What to take away
If you have been told that a SIP removes the risk of the market, you were told something the record does not support. Over five years it did not even remove the risk of losing money.
Keep the standing instruction — it is doing useful work, just not that work. Then handle market risk where it can actually be handled: by deciding how much of your money is in shares at all, and by keeping anything you will need within the next few years somewhere a fall cannot reach it. Those two decisions do the job that a monthly date cannot.
Educational content only. This is not personalised financial, investment or tax advice. Figures quoted are historical or illustrative and are not forecasts. Consult a qualified professional before acting on anything you read here.