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Why you shouldn't avoid doing SIP investments in a Volatile market?

  • October 1st, 2022
  • Admin

When cautious investors anticipate that the stock market will become stagnant, they may give up on their equity mutual funds. They choose to invest the money in debt because they think it is a safer option.

When cautious investors anticipate that the stock market will become stagnant, they may give up on their equity mutual funds. They choose to invest the money in debt because they think it is a safer option. Financial planners and consultants to mutual funds, however, recommend the opposite. During difficult times, intelligent investors are more likely to stick to equities investing.

Volatility and the Investor

Investors are alarmed by volatility and the economic downturn. The stock market is known for its unpredictable nature. For example, the Sensex dropped nearly 1,000 points in a single day during the most recent financial year. Mutual fund participants frequently think about stopping their SIP investments during such circumstances. This is not wise nor advisable. Investors must keep up SIPs and make plans for long-term gains.

Investors are presented with this issue each time there is a market correction (of discontinuing of sip and maybe redeeming investments). They discontinue their SIPs and either invest the funds in fixed income (debt funds) or stop them entirely.

So, in such a market environment, what is the best option? Here are some pointers:

  • Market declines that cause SIPs to underperform are not an excuse to quit investing.
  • After a market decline, investors must increase their SIPs. Increase SIP investments if at all possible.
  • SIP investments should be made over the recommended time period of 5 to 10 years, during which the equity markets may experience ups and downs, but investors would stand to gain.

Usually, it is too soon to evaluate a SIP investment after one or two years. The minimal time frame for evaluating the performance of an equity fund is five to seven years.