A lot of investors take the apt step of starting an SIP in mutual funds. It is a journey well begun, no doubt about that. However, several investors stop their SIP investments after a while due to some reason. But not allcan justify their need to withdraw. Before we dive into the potential reasons why one may stop their SIPs, let’s quickly recall what an SIP is.
What is SIP?
Systematic Investment Plan, commonly known as SIP is a way to invest in mutual funds. SIP facility permits an individual to invest a fixed amount of money in their desired schemes in a disciplined manner at fixed intervals. The periodicity of the intervals can be daily, weekly, monthly, quarterly, semi-annually, or annually. An investor can invest in SIP with an amount as low as Rs100 each month.
Following are some of the reasons why investors might give a break to their SIP or even stop them:
- Waiting for the bullish market to cool
When it comes to mutual funds, a high market is perceived as a blessing in disguise. Following this thought-process, several investors think that they have to pause their SIP investments, thanks to market critics constantly issuing warnings that a “market correction” is likely to happen. These investors further intend to begin their SIP investments only when the market has finished “correcting”. This is a classic example of trying to time the market. However, individuals often forget the harsh fact that as complex the markets are, they could go up even further.
- Losing money in a bearish market
The stock market is guaranteed to witness frequent ups and downs over time. This is called market volatility and could be quite scary for several investors. However, one should be reminded that the market goes up in the long run and so do the stocks of most “good” companies. Therefore, over a period, most equity mutual funds are likely to perform well.
- Need money for purchasing home
Buying a house is usually a significant personal milestone for most Indian families. People undergo many sacrifices so that they can afford their dream home. They also often stretch beyond their budget and eventually, the EMI occupies a big chunk of their salary. This often leads to scarcity of funds for their SIP investments. However, one should remember that just as their house is non-negotiable, so is their retirement. And delaying retirement might not always be under their control, even if they believe that they can work efficiently into their 70s. Rather than stopping your SIP altogether, you should consider to reduce the SIP amount and escalate it each year as your salary increases.
One can also use an SIP return calculator to understand the future value of their investments. So what are you waiting for? Invest in SIP and get a step closer to achieving your goals. Happy investing!