SIPs should not be stopped. Add more during turbulent moments

While individual investors have shown a lot of maturity in sticking to their systematic investment plans (SIPs) and new investors have started investing during this turbulent era of the market, given the market swings, many may try to book profits now. Experts argue that while market turbulence comes and goes, leaving a SIP unchecked will result in the best possible outcome for them.

Despite the volatility in the equities markets, SIP inflows have remained strong. Monthly SIP contributions reached an all-time high of Rs 12,693 crore in August, the fourth month in a row that totaled more than Rs 12,000 crore. In addition, Mutual fund SIP assets under management (AUM) accounted for 16% of the total AUM of Rs 39.33 trillion. Do not redeem SIPs in a frenzy.

Unlike in prior market declines, mutual fund investors are not panicking this time. According to Santosh Joseph, founder and managing partner of Germinate Investor Services, investors continue to stay put and make new SIPs even in tumultuous markets because they know it is an excellent environment for SIPs to thrive, and when the market volatility subsides, SIPs reward them handsomely.

Investors must recognize that market volatility is inherent in their nature. Nobody is sure what the top and bottom are. According to Varun Fatehpuria, founder and CEO of Daulat, a new-age wealth-tech organization, it is extremely impossible to anticipate how the markets would perform in the short term. “Investors should resist the temptation to book early profits.” “Rather, they should stay invested to allow their investments to compound over time,” he advises.

In reality, during a market slump, investors are frequently encouraged to make short-term profits. This causes people to ‘buy high and sell cheap,’ which is the exact opposite of what they should be doing. SIPs are a wonderful approach to limit that psychological behavior by allowing investors to invest over time.

An investor should withdraw money only when his goal is closer or if the necessity for which he began the investment emerges. This should be your major motivation, not market volatility or how much your portfolio is up or down. Investors should keep in mind that starting a SIP at the peak of the market right after the following drop may result in a negative SIP. In such a circumstance, investors may be tempted to discontinue the SIP or redeem the units, incurring a loss.

Profit from the volatility

Because of the benefit of rupee cost averaging, an investor always gains from investing in a SIP when the market is volatile. In reality, SIPs are designed to assist investors to ride out market volatility by allowing them to buy more when markets are down and less when markets are high, decreasing their total cost of acquisition over time through rupee cost averaging.

Investors should stay involved for at least five years to allow the investment to progress through several market cycles. In reality, SIPs are ideal for beginning investors who do not want to take any risks but yet want to engage in the stock market.

According to experts, throughout a cycle in which the market goes up and down or at best extremely volatile, investors would gain much by not buying at one high or low price but rather ensuring the average cost is significantly lower. “More important is the discipline and ability to automate saving.” “When you combine rupee cost averaging with a layer of investment automation and the discipline that occurs when you invest through SIP, you get a multipronged benefit,” explains Joseph.

Investors may avoid the problems of trying to time the market by investing in a disciplined and goal-oriented way. SIP investing is a smart strategy to develop a long-term portfolio. One