Systematic Investment Plan, commonly known as SIP, is a tool to invest in mutual funds. However, a lot of people often stop their journey of staying invested in SIPs after a time. Let’s understand the top 3 reasons why investors give a break to their SIP or stop them altogether.
- Waiting for the high market to cool
When it comes to mutual fund investment, a market high is perceived as a blessing. Following this, several investors think that they need to stop their SIPs, thanks to market critics issuing warnings that a “market correction ” likely to happen. These investors intend tobegintheir SIPs again only when the market has finished “correcting”. This is a classic example of attempting to time the market. However, investors often forget the fact that as complex the markets are, they can go up even further.
- Losing money in a falling market
The stock market is bound to witness frequent ups and downs. This is called market volatility and could be scary for a lot of investors. The market goes up over the long run and so do the stocks of most “good” companies. Mutual fundsstrive to invest the money collected from investors in good quality shares. Therefore, over time, most equity mutual fundsare bound to perform well.
- Need money for buying home
Purchasing a house is usually a significant personal milestone for most Indian families. Peopleundergoseveral sacrifices to afford their dream homes. They also often stretch beyond their budget and eventually, the EMI occupies a big chunk of their salary. This often leads to a shortage of funds for SIP investments. However, one should remember that just as their home is non-negotiable, so is their retirement. And delaying retirement might not really be under their control, even if they believe that they can work well into their 70s. Rather than stopping your SIP altogether, youshould consider to reduce the investment amount and escalate it each year as your salary increases.
The underlying idea behind an SIP is to stay invested and ride the ups or downs and allow equity to do its job by helping you stick to a timeline that works best for equity.You can use an SIP calculator to have an idea about your future earnings. A good habit stops proving fruitful results if you stop practising that habit too early. So allow your SIPs to grow over time. Remember, more than the market, you control your true destiny. Happy investing!