Do you know why many investors miss their goals so miserably?
There are mainly three reasons:
- Lack of discipline
- Lack of awareness about financial matters and investment products
- Lack of patience
Wealth accumulation happens only when you invest regularly, choose right investment avenues and have patience until your investments bear fruits.
Systematic Investment Plans (SIPs) offered by mutual funds can help you grow money without doing anything extraordinary.
Thankfully, many investors have realised the benefits of investing in equity oriented mutual funds through SIPs.
According to the Association of Mutual Funds in India (AMFI), monthly SIP collections of the mutual fund industry grew 109%—from Rs 3,698 crore in September 2016 to Rs 7,727 crore in September 2018.
But this success hasn’t been unblemished.
Given the tough market conditions we are facing of late, many novice investors (and some experienced ones too) have started discontinuing their SIPs.
Why it’s a financial disaster:
If you discontinue your SIPs when markets are falling, you are denying yourself an opportunity to accumulate more units of a mutual fund scheme at lower average prices.
It’s a no-brainer: more the units you accumulate, the higher would be the value of your investments when markets recover.
Should you worry about market declines?
Going by the historical evidence, markets are driven by the sentiments in the short-term and by the fundamentals in the long run. Unless you have invested in mediocre mutual fund schemes which won’t sustain the market downturn, you need not worry.
Traits of silly simpletons:
- Discontinuing SIPs under falling markets denotes that you haven’t analysed your risk appetite well.
- If you opt out of SIPs, you are likely to save less and spend more. For many of us, SIPs is a forced investment which inculcates an investment discipline—a must for wealth creation.
- Giving up on your SIP commitment also suggests that you haven’t thought through your financial plan. After all, it’s essential to have an aim in your mind before you invest in a mutual fund SIP.
In short, those who discontinue SIPs abruptly demonstrate all traits of investors who fail to create long-term wealth.
You may think about discontinuing SIPs if:
- The mutual fund scheme underperformed consistently on various timeframes and under different market cycles. Consider starting a SIP in a well-performing fund.
- There’s a change in the risk profile or the investment mandate of the scheme. You may find a scheme that conforms to your risk profile and financial objectives.
- You achieved your financial goal for which you had started a SIP.
Do you break out in a cold sweat watching choppy markets?
Speak to our financial expert for clarity. Stopping SIP isn’t a solution to beat your fear.
It will only put your financial goals in peril.
Disclaimer: Ventura Securities Ltd has taken due care and caution in compilation of data for its web blog. Information has been obtained from different sources which it considers reliable. However, Ventura Securities Ltd does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Ventura Securities Ltd especially states that it has no financial liability whatsoever to any user on account of the use of information provided on its web blog. The information provided herein is just for the knowledge purpose and shouldn’t be construed as investment advice under any circumstances.