A client's Rs 20,000 monthly SIP is down 22% after an eight-month fall and he wants to stop. Show what the SIP bought during the fall and what stopping now would give up if the market recovers over the next year.

Keep the SIP running: the fall is when it buys the most, and stopping now gives up the cheapest units. His last instalment bought 298 units against 200 in the first month, and his average cost is 81.2, so he breaks even after a 28% rise, not 58%. If the market recovers to 100 in a year, continuing leaves him about Rs 62,111 better off than stopping, and about Rs 1,26,695 better off than redeeming.

Each instalment is a fixed amount of money, so a lower price buys more units. A household that spends Rs 2,000 a week on vegetables brings home more when prices fall and less when they rise, without deciding anything. Nakul's first Rs 20,000 bought 200 units at 100; his eighth bought 298 units at 67.0. Over the eight months he bought 1,971 units at an average of 81.2, about 19% below where he started. This is rupee cost averagingInvesting a fixed amount at regular intervals, so more units are bought when prices are low and fewer when they are high, which pulls the average cost below the average price., and it does its work only in a falling market, which is exactly when it feels worst.

Because most of his money went in after prices had already dropped. The market is down 36.7%; his portfolio is down 22%. His break-even is his average cost of 81.2, so a rise of 28% from here gets him back to zero, while the index needs 58% to regain its peak. Clients compare their statement with the market's peak, which makes the hole look deeper than it is.

Run three choices over the next twelve months, with the market climbing back to 100. Continue: twelve more instalments buy 3,101 units at prices between 63.3 and 100. Stop: he keeps his units and puts Rs 20,000 a month in the bank at 6%. Redeem: he sells everything at 63.3 and banks it all. Continuing ends at about Rs 5,07,137, stopping at about Rs 4,45,026, and redeeming at about Rs 3,80,442. Stopping gives up Rs 62,111; redeeming turns a paper loss into a real one and gives up Rs 1,26,695.

Say the limit plainly, because he will hear it as a promise otherwise. Nobody knows the market will recover within a year; it could fall further, and then the next instalments buy even more units at lower prices, which helps an eight-year investor and hurts a one-year one. The right test is the goal, not the statement: his money is for a purchase eight years away and he has an emergency fund, so a fall now is a cost he has time to recover from. If the down payment were twelve months away, the advice would be to move the money to debt regardless of the market. Close with the view: continue the SIP, do not redeem, and review the asset mix only if his goal or timeline has changed.