Are you in dilemma with your SIP’s too? Well, many investors are confused about whether to keep investing or stop investing, or even stay invested in SIP due to the pandemic situation.
We have been asked by our clients,” A person who is investing in 4 different mutual funds for the past 3 years. In the current market condition should they keep investing or stop their SIP’s?
These questions were mostly asked by moderate risk-takers from all around the world. So, in order to answer it, we would like all of you to get back to the basics of investing.
Basic Idea of Investment
The basic idea of regular investing is to invest in a disciplined manner irrespective of the conditions of the market. Often these times are volatile times for investors as well since investors worry about stop investing. However, investing through SIP in such times helps an investor to overcome some physiological hurdles.
During these times investors can get more units in such downtrend at less likely rates. That enables investors to get hold onto many more shares that too at a less average price per unit share than before. This is the reason how regular investors get maximum returns through SIP.
What Happens If Investors Stop Investing in SIP?
If a person stops investing or not buying in this crucial phase then they are letting go of the opportunities of getting more units. Equity is a very risky as well as volatile investment. So, investors should access their risk appetite during such times.
It is because of these characteristics, equity is considered extremely risky in the short term. Investors could also face huge losses in the short term. However, equity also has the potential of offering more superior returns than any other asset over a long period. If you can not put up to the volatility of losing capital in equity in the short term then you should consider your investment in equity mutual funds.
It is also advised to seek the advice of mutual fund advisors as mostly new investors tend to panic during their early years. So to support them in going through their full cycle of ups and down to gain confidence and insights; to ensure investors keep investing during early initial years of equity trading.