These days there is a lot of volatility in the stock market. It cannot be predicted when the market will suddenly turn green and when the Sensex will take a dive and go down by 2500 points. Therefore, as soon as there are ups and downs in the stock market, the question arises in the minds of many investors whether SIP should be stopped. According to a Mint report, some investors have stopped or reduced SIPs in recent months, but a large number of people are still continuing to invest. It is clear from this that long term investors are not much affected by market movements.
In fact, when the market falls or volatility increases, it is natural to feel nervous. Especially when there is global tension or economic uncertainty, investor confidence may weaken. But experts believe that a hasty decision taken at such a time can prove to be harmful.
Why is it not right to stop SIP?
In a Mint report, Viram Shah, Co-founder & CEO, Vested Finance said that it is not wise to reduce or stop SIP just because of market fluctuations. The purpose of SIP is to make regular investments even in uncertain times, thereby providing the benefit of rupee cost averaging. That means when the market is down, you buy more units and when it is up, you buy less. If you stop SIP midway, you lose the benefit of this entire system. This strategy improves your returns in the long run.
The real opportunity comes in the fall.
Expert Swapnil Aggarwal, Director, VSRK Capital also said that market volatility is the time when SIP is most effective. According to him, stopping SIP due to fear can backfire as investors can accumulate more units at a lower price. That is, the time when the market looks weak, that time lays the foundation for future profits.
Money is made only in the long run
Experts believe that the market always moves in cycles. Sometimes boom, sometimes decline. But investors who remain consistent earn good returns over time. The most important thing in SIP is discipline and patience. Instead of reacting to short-term fluctuations, it is better to focus on your larger financial goals, like buying a house, children’s education or retirement planning.
What should you do?
Investors should avoid reacting immediately to every movement in the market. Take the decision only after understanding your financial situation and goals. If possible, seek advice from a financial advisor and make a strong investment plan. If your financial condition allows, increasing SIP when the market falls can also be beneficial. But this decision should be taken thoughtfully and under proper guidance.
Disclaimer: This article is for information only and should not be considered as investment advice in any way. TV9 Bharatvarsha advises its readers and viewers to consult their financial advisors before taking any money related decisions.