The slightest fluctuation in the market scares the small investors and makes them conscious about their investments in the market. Lack of investment knowledge and proper financial guidance makes them take wrong decisions regarding their investments. Even the SIP investors fall prey to their lack of financial expertise and plan to discontinue their systematic investments in a critical market phase.
What makes an investment in SIP fruitful in a down market?
The volatile nature of the equities makes it difficult for investors to predict how the market will act on any given day. Most small investors panic in a down market and tend to redeem their funds or stop the SIPs altogether. Investors should stay calm during such a situation since SIPs are most fruitful in a volatile market.
The following is the reasons why you should continue SIPs in down market:
- The easiest way to tide over a low market phase is through continuous investments in the SIPs; a regular investment habit will help the investors reap the benefits in the long run.
- A dip in the market offers the investors with the opportunity to add more units to their collection at a lower cost. Investors can sell off these units at a higher price when the market thrives and earns good returns from the transaction. It allows the investors to reap the benefits in terms of reduced average cost.
- Investors who have put their money into long-term plans are bound to see some negative returns at various times but that should not deter them from continuing their SIPs. Though the equity market goes through the period of lows, its returns follow the nominal growth rate of the GDP in the long run.
- Investors who have put in their funds in short-term SIPs should not be too quick to decide the merit of the scheme in terms of performance and returns. On an average, a scheme should be judged on the basis of its performance for over 3-5 years.
- Usually, an investment takes more than a year to start compounding the returns on the investments. Even in a down market, the investors should continue to invest systematically so that they can generate a steady flow of revenue through the compounding feature of regular investments.
- The main objective of most long-tenured SIP schemes is to aid the investors in accomplishing their long-term financial goals. The equity market is a volatile place; it doesn’t lay low all the time, discontinuing your SIPs on the basis of the current market scenario will cost you in terms of losing the ability to meet your long-term financial goals. A systematic investment even in the down market will help you generatea steady income that will ultimately strengthen your corpus over time.
Investing in SIPs is crucial for wealth creation in the long run that aids the investors to meet long-term financial goals and plan their retirement better. Contact our financial experts to find out about the investment tricks that will help you to tide over the low market phase seamlessly.Follow Us: