MF investors stop SIPs when markets fall, jump into NFOs chasing themes: Why goal-based investing matters

A neighbour in my building paused his Systematic Investment Plans (SIPs) this August after watching a viral reel predicting a “market crash by Diwali.” The same evening, he spent Rs 1.2 lakhs booking a Maldives trip—“because experiences matter more than markets.” Both decisions felt logical to him in the moment. Both had nothing to do with his actual financial goals.

That, in essence, is why goal-based investing matters: it reduces the influence of our behavioural biases by giving money a destination.

India is investing more, but are we investing better?

The numbers are staggering. August 2025 saw SIP inflows of Rs 28,265 crore, according to Association of Mutual Funds in India (AMFI). Equity mutual funds enjoyed 54 straight months of positive inflows, totalling Rs 33,430 crore in August. Investors stop SIPs when markets fall, jump into New Fund Offers (NFOs) chasing “themes,” and struggle to match portfolios to actual life goals. In other words, enthusiasm is high, but behaviour often sabotages outcomes.

Behavioural traps that derail investors:1

Recency bias: Mistaking the latest headline for a forecast

If small-caps rallied last quarter, we assume they’ll rally forever. If the market dips two weeks in a row, panic sets in. Recent spike in sector/thematic fund inflows proves this bias: investors generally chase whatever’s trending instead of aligning to long-term needs.
Goal anchor: Hypothetically, father saving for his daughter’s college admission won’t dump SIPs just because markets corrected 10% this quarter. A clear, time-dated goal prevents knee-jerk exits.

Herd behaviour: Everyone’s doing it, so should I
India’s equity Mutual Fund Assets Under Management has grown sixfold in a decade. That’s healthy. But the surge in NFO subscriptions often reflects herd behaviour—crowds piling into “the next big thing”. We get bored of doing the same thing again because ‘akhir hume kuch naya chahiye’. 

Goal anchor: A family saving for retirement can ignore the herd because their corpus math is based on their lifestyle needs, not on whether a fund isthe rage this season.

Loss aversion: Pain of losses greater than joy of gains
Behavioural economists call it the 2x rule—we hate losses twice as much as we love equivalent gains. That’s why investors redeem after a dip, locking in losses, instead of letting time repair the damage.

Goal anchor: AMFI data shows 45% of equity assets are redeemed within 2 years. Investors who linked SIPs to specific goals tend to avoid emotional redemptions because the focus is on the end use, not this month’s Net Asset Value.

Mental accounting gone wrong

We splurge bonuses on gadgets but hesitate to top up SIPs. Money without purpose tends to leak.

Goal anchor: Goal-based plans treat every rupee as serving a purpose—whether that’s “Aarav’s college” or “retirement corpus.” Labelling turns mental accounting from weakness into strength.

Overconfidence: I can outsmart the market

From Telegram stock tips to AI-driven “portfolio hacks,” Do it Yourself (DIY) investing often morphs into overtrading. Without expert guidance, DIY investors often rely on incomplete information or short-term trends, which can lead to inconsistent outcomes and unnecessary risks. 

Goal anchor: A framework built on goals, risk profile, and investment objective keeps overconfidence in check—your plan decides, not your mood.

Practical behavioural nudges for investors

>Name your SIPs: “Aarav’s College SIP.” Studies show labelled money is harder to misuse.

>Automate raises: Link SIP top-ups to annual appraisals—so discipline grows with income.

>Use review rituals: Once a year, check progress and rebalance the portfolio, if required. The rest of the year, ignore the noise.

>Create ‘friction’ to exit: A reminder pop-up or a call from your advisor before redemption can prevent panic selling.

>Celebrate milestones: When your SIP crosses a particular threshold e.g. ₹10 lakh, acknowledge it. Positive reinforcement cements good behaviour.

Goals turn markets from noise into background music

When the Sensex wobbles 1,200 points in a day, the headline screams. But if you’ve linked investments to retirement in 2045, that blip is just background music.

The bottom line

Markets are unpredictable. Behaviour is irrational. But goals help keep you on track. So, the next time you’re tempted to chase a theme or exit an SIP, pause and ask: “Is this decision helping or hurting my actual goals?”

Chances are, that single behavioural checkpoint may do more for your wealth than any “top fund to buy now” list or random recommendations.

Note: The author of this article is National Head for Sales & Marketing at Canara Robeco Mutual Fund