Systematic Investment Plans (SIPs) are a disciplined approach to building wealth over time. However, the benefits of SIPs hinge on one crucial factor: consistency. Missing instalments can disrupt the compounding process, significantly reducing the potential corpus. A 20-year study highlights how missed vs. extra instalments impact long-term returns.

What Happens When You Skip SIP Instalments?
Let’s compare two scenarios over a 20-year period for a ₹10,000 SIP:

Key Observations:

  1. Missed Instalments:
    By skipping 3 instalments annually, the total invested amount decreases by ₹12 lakh over 20 years. However, the final corpus is reduced by ₹46 lakh due to the loss of compounded growth.

  2. Extra Instalments:
    Adding 3 extra payments each year increases the invested amount by ₹12 lakh but boosts the corpus by ₹46 lakh. This shows how consistent and additional contributions amplify the power of compounding.


Example: Real-Life Impact

Let’s say you begin a ₹10,000 SIP in 2024 and plan to continue for 20 years:

  • If you skip 3 instalments every year, your total investment would be ₹18 lakh instead of ₹24 lakh.
  • The compounded returns would shrink to ₹67 lakh instead of ₹91 lakh.
  • Essentially, you lose ₹24 lakh in potential wealth for short-term savings of ₹6 lakh.

Why Does Consistency Matter?

  1. Compounding Disruption:
    SIPs rely on reinvesting returns to generate exponential growth. Skipping even a few instalments interrupts this cycle.

  2. Loss of Market Opportunities:
    Missing payments during market dips could mean losing out on accumulating more units at lower prices, a key benefit of SIPs.

  3. Reduced Goal Achievement:
    Missed instalments may lead to a shortfall in achieving long-term financial goals like retirement or education planning.


How to Stay Consistent

  1. Automate Payments: Set up auto-debit for your SIPs to avoid missing instalments.
  2. Plan for Emergencies: Maintain an emergency fund to cover unexpected expenses, ensuring your SIPs remain uninterrupted.
  3. Prioritize Investments: Treat SIP instalments as non-negotiable, like a utility bill.

Key Takeaway

Skipping SIP instalments can cost you much more in lost returns than the amount saved. The power of SIPs lies in their consistency and discipline. Automate your payments, prioritize your investments, and let compounding work its magic over the long term. Stay consistent to secure your financial future!