SIPs in the bear market

The SIP investors shouldn’t be
deterred by the irregular movements of the equity marketduring the bear market
phase. The prime philosophy that underlines an investment in a SIP is
continuity. Investors should continue their investments in SIPs, regardless of
the market condition to avail maximum benefits in the long run.

The
relationship between SIPs and bear market:

Though bear markets are labelled as
stressful periods they are in fact deemed to bring terrific investment
opportunities.

The following reasons highlight why
the bear market is a good friend for SIP investors:

  • Rupee cost
    averaging:
     Rupee
    cost averaging is a feature that substantially brings down the average cost of
    purchase over the time and it can only function effectively when the investor
    makes active investments even in a fluctuating market. If SIP investors
    continue to invest in a bear market, they will be able to distribute the risk
    factor over the years and will be able to achieve the goal of buying low during
    the bear market and selling high during the rising market.
  • Power of
    compounding:

    SIPs offer the investors with the benefit of reinvesting the sum they receive
    from their investment and therefore provide them with the benefit of earning
    more money through its compounding feature. Investors can further use the
    reinvestment feature in their favour during the bear market and earn higher
    returns in the long run.
  • Recovery: The fact that
    the bear market recovers quickly represents the phase as a great time for
    making investments and accumulating units at a lower cost. The long-term aspect
    of investing in SIPs tends to minimise the effect of market volatilities and
    negative returns over the years and keeps your long-term financial goals
    unharmed.
  • The market
    timing:

    SIPs offer the investors freedom from market timing; even when an investor has
    made a risky investment in a dangerousmarket, they can recover the loss and end
    up earning good returns by staying invested over the years.

Tips
to invest in a bear market:

  • It is only during the chaotic market
    conditions when the investors are able to gauge the quality of their investment
    portfolio. To cope with the bear market, investors should focus more on quality
    investments.
  • Thorough knowledge about qualitative
    investment helps the investors to identify stocks with great growth potential
    and scope of attractive valuation. Inculcate a sense of expertise and
    investment knowledge to be able to reap maximum benefits in a bear market.
  • Adopt a disciplined approach towards
    investment so that you can tide over the momentary fluctuations in the market
    over the course of investment through a steady flow of returns.

When compared to the length of bull
markets, bear markets are usually shorter and therefore tend to be more
volatile than the former. Investors can use it in their favour by increasing
their allocation of assets through different investment options.

The bull and the bear markets are integral and
inevitable part of the economic cycles; consult our professional financial
advisors to gain insights and to make the most of a bear market through an
investment in SIPs.

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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 - 85350

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