by on February 7, 2019

Most of the new or conservative investors plan to pause the periodic SIP investments during the volatile market as of 2018. As equity mutual funds are directly dependent on the stock market, they are prone to fluctuations and might decrease the invested amount for short to medium term depending upon the strategies followed by the fund manager. According to the investment experts at MySIPonline, pausing a SIP during a volatile market is not the right decision as the investor is likely to miss out the gains.

Why SIP?
Systematic Investment Plan (SIP) is a favour for the retail investors to build enormous capital through a periodic investment of small amount at regular intervals. New as well as experienced investors choose SIP mode of investment to get the benefits of rupee cost averaging and power of compounding. When the market is low, more units can be purchased at a lower price without timing the market. 

Effects of Pausing SIP in Volatile Market
If you have your SIP returns in negative in a volatile market, pausing is not the right decision. SIPs are structured to give the investors advantage to increase the profit margin in future. Investments done when the NAV is low can provide high returns when the market gets corrected. The effect of pausing a SIP can be well understood by an example.
Suppose you have a SIP of Rs 5000 in some X fund for 5 years, Now if the NAV is fluctuating and you decide to pause further investment when your returns were negative. After a few years, you will realise that the returns are not as much as of those who didn’t pause SIP. This is because you had missed the opportunity to buy more units when they were available at a cheaper price. Even if the SIP amount is deducted at higher NAV, no loss will be faced as in the long term NAV is much likely to increase further.

What Is the Right Thing to Do?
“Buying low and selling high” is the basic mantra of successful investing but practically it is never known that NAV is at the lowest point or it will go even lower. The best way to get maximum output from your mutual fund investment is by making an additional purchase with the SIP when the NAV is lower. To do that, one must be experienced and aware of the market conditions. For the new investors, the best way to enjoy wealthy outcome through mutual funds is to start a SIP in a most suitable fund and watch the investment growth over the long term. 

SIP might not be perfect, but for new retail investors, it is the best way to ensure a financially secured future. Choosing the right scheme or right set of schemes is the most important step which needs to be taken under the supervision of an expert. Experts at MySIPonline recommend the most suitable schemes to the investors depending upon the risk tolerance, tenure, and objective behind the investment. A user-friendly dashboard, SIP calculator, and many other tools further decrease the complexity in online investments and allow every investor to enjoy a financially secured future. 

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