India's celebrated systematic investment plan (SIP) revolution is facing a hidden crisis that threatens to undermine the wealth creation dreams of millions of investors. While SIP collections reached record highs in 2025, an alarming dropout rate reveals that most new investors are abandoning their investment journeys prematurely.
The Record Highs and Hidden Churn
On the surface, India's SIP story appears stronger than ever. In October 2025, investors poured INR 29,529 crore into mutual funds through SIPs - the highest monthly collection ever recorded. This massive inflow demonstrates the tremendous popularity of the "drink stocks SIP by SIP" philosophy that has captured the Indian investor's imagination in recent years.
Most of these SIP investments are channeled into equity mutual funds, which primarily invest in stocks. The SIP route allows regular investors to participate in stock market growth without timing the market, making it an ideal wealth creation tool for long-term goals.
The Disturbing Reality of SIP Cancellations
Beneath these impressive numbers lies a troubling trend. In 2025, a staggering 86% of new SIP registrations were cancelled, according to data analyzed by the ET Bureau. This massive churn rate indicates that while investors are enthusiastically starting SIPs, very few are staying the course long enough to benefit from compounding.
Several factors are driving this high dropout rate. Market volatility creates anxiety among new investors, causing them to exit at the first sign of turbulence. Mis-selling by distributors who prioritize commissions over investor education also contributes to inappropriate SIP selections that don't match investor risk profiles.
Perhaps most concerning is the short-term behavior exhibited by investors who treat SIPs like quick-return schemes rather than long-term wealth creation vehicles. This mindset directly contradicts the fundamental principle of systematic investing.
Implications for India's Wealth Creation Journey
The high SIP cancellation rate represents more than just individual investment mistakes - it threatens to undermine India's entire retail investment ecosystem. When investors frequently enter and exit SIPs, they miss the power of compounding that comes from staying invested through market cycles.
Financial experts warn that until transparency improves in how SIP products are sold and until investors develop the discipline to stay invested for the long term, India's celebrated SIP engine risks becoming more about constant rotation than genuine wealth creation.
The solution requires action from multiple stakeholders. Fund houses need to improve investor education about the importance of long-term commitment. Regulators must ensure better disclosure practices. Most importantly, investors themselves need to understand that SIP success comes from patience and persistence, not from reacting to short-term market movements.
