SIP – Your Best Friend in Volatile Markets

SIP – Your Best Friend in Volatile Markets

By Akhil Chugh

Date April 9, 2023

Nothing is permanent in life and in the stock markets. Good times follow bad times as much as a bull run follows a bearish phase. Investors hurt by volatility often say how the bearish phase is more prolonged than the bull run while forgetting how sporadic jumps in the market followed by a rally in Indian stock markets not only help overcome temporary losses but yield returns that far surpass the inflation rate.

The recent downtrend in the market is not necessarily a sign of things going south. In situations like these, investors must not panic but rather be prepared with their investment strategies. When it comes to devising such strategies, a sound understanding of the market is crucial. Get in touch with our team of finance experts to help you devise the right strategy to make the most out of this fluctuating markets.

The market ahead in 2023 is expected to be choppy due to geo-political and macro factors. Those new to investing must brace themselves and be prepared for whatever the market has to offer this year. In this volatile market, focusing on the following strategies will not only ensure continued returns but also enable much-needed stability.

Most investors are asking what they should do when markets are volatile. Should they delay their SIP and wait for the market to stabilize? Should they stop their SIP altogether? The short answer is no. You should not delay or stop your SIP and here’s why.

Why Investors should not stop/withdraw Mutual Fund SIP during volatile times?
  • SIP in Mutual Funds is the sweetest fear fighter, to meet out market volatility. One of the most important advantages of SIP is rupee cost averaging. When you invest a fixed amount every month, the number of Mutual Fund units you actually buy depends on their market price. Therefore, with the money you invest each month, you can buy fewer units when the market moves up and more units when the market moves down. This brings down and averages the price of purchase. This in the long run enhances your returns on investment substantially.
  • Have you ever thought of stopping your kid from going to school just because they scored low in couple of exams? Schooling discipline the way children study and behave, right? Likewise, you will witness ups and down in the market. Mutual Fund SIP streamlines the processes and help you gain in the long term.
  • The success of equity investment depends on market fluctuations. Not only selecting the right investments but when to invest also plays a vital role in getting high returns. Whereas, mutual fund SIP helps in solving the problem of when and where to invest during volatile timesAn SIP ensures that your instalments are invested through the ups and downs of a market cycle. A sharp correction in the markets can rattle even experienced investors resulting in discontinuing their SIPs. What we need to realize is that it is exactly the SIP investments done during market corrections that lead to the advantage of lower average cost per unit. Therefore, ensure that SIPs in well-chosen schemes are running as long as you have money to invest.
  • There are many temporary factors impacting on how the market works and also the mutual funds. For example, elections anticipated in the coming months can create a negative impact on certain instruments. Selling these without thinking long term will lead to lower returns. If you continue your mutual fund SIP during these temporary down phases you will reap more once the market recovers.

Net Brokers Takeaways:

  • Staying invested and continuing with SIP investment is important to achieve your long-term financial goals.
  • Having a longer investment horizon and diversifying your portfolio across market sectors and asset classes can help you ride the market volatility like a pro.
  • Always invest with a goal in mind. The most critical part of investing is not how much money you make when markets are up. It’s how much money you keep when markets are down. When things go wrong in the financial markets, maintain perspective by focusing on your original goals and objectives.

Temporary downturns like the current scenario shouldn’t put a damper on your investment plans. If your investments are spread out over time and across different types of investments, it’s less likely that one bad year will throw off your whole strategy. In fact, this sort of volatility is why investing regularly with SIPs is so important.

For more information, get in touch with us today! Download our mutual fund app & start investing for your long-term financial goals.     

Stay invested!