Why your SIP shows a loss after two years
The most common question from people two years into their first SIP, and the answer that almost nobody finds satisfying.
Published 16 July 2026 · 5 min read
Why this happens so often
A SIP invests a fixed amount every month. After two years you have twenty four purchases at twenty four different prices, and your average cost sits somewhere in the middle of that range.
For the total to show a gain, the current price has to be above that average. Over two years, a flat or mildly falling market puts it below. The businesses underneath may have performed perfectly well.
There is a second effect people miss. Most of your money in a young SIP is recent money. After two years, half your instalments are less than a year old and have barely had time to do anything. The early instalments that have had time are the smallest part of the total.
The three questions worth asking
Instead of asking whether the number is red, ask these.
1. Has the fund lagged its own benchmark, or has the market fallen?
These are completely different problems. If the market is down 12% and your fund is down 13%, the fund did roughly its job and the market fell. If the market is up 8% and your fund is down 4%, that is a fund problem worth investigating.
2. Has anything about the fund changed?
A change of manager, a change in the stated mandate, or a sharp rise in the are real reasons to reconsider. A poor two years, on its own, is not.
3. Has anything about your situation changed?
If you now need this money within two years, that is a genuine reason to move it, and the mistake was made earlier when equity money was assigned to a short horizon.
What are not reasons to stop
- The number is red. Two years tells you almost nothing about an equity fund. Five years begins to.
- A friend fund did better. Over any two year period, some fund did better. That is arithmetic, not information.
- The news is bad. It usually is. Markets have risen through decades of bad news.
- You feel you should do something. This is the most common reason people act and the worst one.
Stopping a SIP during a fall is the single most self defeating move available, because falls are precisely when the fixed amount buys the most units. See SIP explained.
What to expect instead
Over a long SIP you should expect several stretches showing a loss, including some lasting more than a year. That is not a failure mode, it is the normal texture of equity investing.
The thing that makes it survivable is not courage. It is having an emergency fund, so a bad stretch never coincides with needing the money, and having written down why you started, so you can check whether anything real has changed.
And the practical suggestion: look less often. A quarterly check gives you four opportunities a year to react. A daily check gives you three hundred.