the most expensive instinct

A friend pinged the group the morning the index dropped four percent. "Pausing my SIP till the dust settles." Two others agreed inside a minute. It sounds like the responsible call. It is usually the costliest one.

So I ran the two paths side by side. Two investors, the exact same 360000 going in, the same fund, the same 36 months, and the same price on the day they each sold. The only difference is what they did when the price fell 40 percent and slowly climbed back.

The first one kept his SIP running the whole way down. The second paused during the fall, held the cash, and put the same money back to work once the market "felt safe again." Equal rupees in. Pure behaviour as the variable.

The one who kept buying picked up 1129 units during the eight ugly months at an average price near 71, while the screen had read 100 on the way in. The pauser bought those same rupees back later at 99.80 a unit. Sticker price. He ended with 329 fewer units and 39471 less, on identical money in and the same exit.

That is the part the careful instinct misses. A SIP is built to buy more when the price is low. The fall is not the thing to hide from. The fall is the discount the whole machine was designed to collect. Pause it and you have walked out of the shop during the sale and come back to pay full price once it ended.

Honest version: if the cash genuinely gets tight, halve the SIP for a few months. Just keep the date alive. A smaller buy at 71 still beats a full buy at 100.

How rupee cost averaging actually works, with the math worked through: