Should you stop or continue your SIP?
Once a data published in which it is said that 'the New SIP growth falls 61% from April to December.' What does it mean? What could be the reason behind this? Does it mean that investment through SIPs is not profitable now? Does it mean that Investors are moving away from SIPs as it is not giving great returns? NO. There could be only two reasons for fall in SIP growth:-
· New SIP registration is slowing down
· Some investors are stopping their existing SIPs due to market Volatility
According to a survey it is observed that many people start their SIPs when the stock market's past performance is good. When the market is in Bull Run people start an SIP and expect that they will get a similar return in future. But remember one thing always: that market can never go up in linear fashion. There are going to be various ups and downs during the period. Volatility is a part of the stock market. And when the return in the portfolio is negative or not as per expectation the people stop their SIP. And when you stop your SIP your temporary loss gets converted into permanent one.
Remember! In the long run SIP loss is temporary and the growth is permanent. So to get higher returns, always try to invest for a long term duration. Creation of wealth through SIP requires two elements; the first one is good financial advice and second is discipline. Returns from SIP are never going to be proportional every year. There would be few volatile years where Investors need to stay disciplined and stay invested before you create wealth. In fact, if you want to become a smarter investor you should increase your SIP amount in your existing SIP folios. Increasing SIP amount would help you to accumulate more units and grow your money even faster when market recovers.
Suppose if you had started an SIP of Rs 10000/month in September 2010 in large cap, the value of your investment of Rs 3, 60,000 after three years would have been Rs 3, 48,896. Seeing this many investors were in panic and stopped their SIPs due to this negative return. But those investors who continued their SIP the value of their investment or Rs 4,80,000 was Rs 6,99,858/- after the fourth Year. And this is the magic of SIP.
The Stock Market is always going to test your patience. You will not be able to create wealth if you lose your patience in investment. Always remember what legendary Warren Buffett has said:-
"Successful Investing takes time, discipline and patience. No matter how great the talent or effort, some things just take time: You can't produce a baby in one month by getting nine women pregnant."
By this line I want to end this article. Hope you find this useful. For any query or financial advice call us at: 9792501234
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