SIPs, a method of investing in mutual funds, are seen as a great way to build wealth over time, particularly for those with monthly cashflows who are unable to make lump sum deposits. Additionally, it aids in averaging out investments over time. Investors may, however, be concerned about the current market volatility and have second thoughts about whether to keep up with their SIPs.
Vinit Khandare, CEO & Founder of MyFundBazaar, commented on the matter by saying that a market correction phase does not indicate a need to redeem such assets. Instead, see it as a chance to purchase more money for less money.
Given the upcoming elections, geopolitical tensions, recessions, pandemics, etc., Khandare added that although it is possible to lose money in mutual funds, making a snap choice while one’s portfolio is in the red is not always necessary.
Similar opinions are held by Amar Ranu, Head of Investment Products & Advisory at Anand Rathi Shares & Stock Brokers.
Stopping the SIP based on a market assessment or a hasty decision is not the best course of action since it would impede progress towards riches, “said Ranu.
Additionally, according to studies, there is a good likelihood that the difference in returns between staying fully invested and timing the market would be rather large if an investor missed a few market bottom points, missing the compounding impact over a longer time.
Additionally, since stock markets have been very erratic and reactive, it is wise to maintain investment via SIPs in order to profit from trading at all market levels.
What should investors do to prepare their SIP?
| Fund name | Crisil Rating | AUM | 3-year returns | 5-year returns |
| SBI Contra Fund – Direct Plan – GrowthContra Fund | 5 | 5,291.25 | 30.32% | 15.87% |
| Aditya Birla Sun Life Tax Plan – Direct Plan – GrowthELSS | 4 | 371.51 | 11.99% | 8.34% |
| Bank of India Tax Advantage Fund – Direct Plan – GrowthELSS | 4 | 608.62 | 26.59% | 16.89% |
| HDFC Tax Saver Fund – Direct Plan – GrowthELSS | 4 | 9,408.98 | 17.96% | 10.05% |
| IDFC Tax Advantage (ELSS) Fund – Direct Plan – GrowthELSS | 5 | 3,692.39 | 24.93% | 15.27% |
Here are some things to think about:
» Distribute resources in varied ways.
The investor’s fund is likely to follow the trend and provide muted returns given that the market isn’t producing a highly attractive return. According to Khandare, it is thus preferable to allocate assets in a diversified way, using a combination of long-, mid-, and short-term funds.
Each investor makes various financial decisions since they each have different risk tolerances, financial objectives, etc.
“It’s not advised to restrict investments to a single kind of fund, however.
Instead, think about your risk tolerance “he added.
» Market swings withdrawal
Market fluctuations may be to blame if the fund you put in performs poorly for a shorter period of time than a year. According to Khandare, it is advised to start searching for a better fund if the performance is subpar for more than 18 months.
“A comprehensive study of the firms the fund has invested in and their future success is essential when determining how well a fund is doing, therefore this shouldn’t be the only factor considered. Instead, a smart tactic is to check.
» The best time frame for investments
The longer one invests in a SIP, the more promising the rewards are. SIPs and investment horizons go hand in hand. Empirically speaking, it takes at least five years to invest in a SIP and average out losses, market risks, and the effect of compounding.
