SIP is very helpful but very few investors can continue it

SIP is one of the most convenient routes of investing. It has a lot of benefits that draws people towards itself. But it also has its share of cons as well. Even though the pros of opting for SIP route outweigh its cons, a significant share of investors may find it difficult to continue.

Reasons why some investors struggle to continue SIPs

SIPs come with an array of benefits. Several features of SIP tend to offer freedom from timing the market to the investors and allow them to compound their earnings through the course of the investment. Some even allow them to cushion the intensity of investment-related risks. But even then, SIPs don’t really make the investments in equity or related funds entirely risk-free.

Let’s take a look at the reasons that prompt investors to discontinue SIPs:

  1. Assumptions: Making a groundless assumption often leads to many disappointments.Investors plainly assume that choosing the SIP route for investing in a mutual fund will automatically make their investments risk-free. Once the market goes through a rough phase and those investors are exposed to the market risk, they begin to panic. Their fear of incurring loss makes them discontinue their investments through the SIP route.
  2. Lack of knowledge: Investors who tend to have half-baked knowledge about the workings of the market are mostly left with regrets. Lacking the basics of the investment market, its phases and the workings of the SIP make investors anxious when things don’t turn as per their hopes. This further prompts them to pause or discontinue their SIP investments altogether.
  3. Poor returns: Some investors think that opting for the SIP route will cushion them against poor returns. SIP does offer the benefit of steady returns to its investors but that income can sometimes be subjected to the market conditions. This often leaves most investors disappointed and they make a hasty decision of discontinuing their SIPs.
  4. Volatile returns: If someone decides to opt for the long-term SIP route but stops it after 2-3 years, they are bound to lose out on the benefits altogether. To avail the full benefit of SIP, investors should continue their investments through the said route even in the bear market. SIP returns sometimes hit a low mark due to the market phases but they also bounce back quickly. Stopped in between owing to a volatile phase will leave investors with as low as negative returns.

The points mentioned above highlight the basic reasons that make some investors discontinue their investments from this route. But several other reasons may force investors to decide a similar thing regarding their SIP routes. If you are among those investors who are planning on giving up their SIPs entirely, you should reconsider your decision calmly.

Talk to our financial advisors to understand the functioning of SIPs better under different market and learn more about how to avail the best from them at any given situation.

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Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Past performance is not an indicator of future returns. Wealth Redefine is a AMFI registered Mutual Fund distributor – ARN - 167127

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