SIP Investor in Equity Mutual Fund have learned to benefit from volatility

Authored By Abhinav Angirish, Founder,

SIP Investor in Equity Mutual Fund have learned to benefit from volatility contributed by Mr. Abhinav Angirish – Founder,

Investing in stocks is a big decision for someone who doesn’t know the ABC of the stock market. There was a time when a few days of correction would dry investor’s funds. People would stop investing and make a frenzied bid to pull out their money.

The concept of SIP drastically altered investor psychology. Instead of dashing to sell in times of panic, the investor has learned to embrace volatility. Instead of investing at one go, the investor can stagger his investments over a period of time. SIP eliminates the need to time the market and eventually translates into better returns for the investor.

Assuming the investor invests Rs 10,000 as a lump sum in HDFC Top 100 fund in the year 2000. If he sold his investments in 2019, it would have fetched him Rs 2,39,905. Instead of investing Rs 10,000 at one go, if he had invested just Rs 500 per month, the returns would have been a staggering Rs 10.25 Lakh! SIP helps to inculcate the habit of savings which ultimately helps the investor to accomplish his life goals. Thus, investing regularly has more benefits compared to one-time investing.

SIP is like a recurring deposit for mutual funds. There is a huge difference between regular investing in mutual funds and recurring deposits. SIP investment in a mutual fund has an enviable track record of delivering above-average returns year after year for the past decade. SIP investment is like making a lifestyle choice. Its impact can only be felt over the period of time.

SIP investment

SIP helps the investor to take advantage of rupee cost averaging. It helps the investor to reduce his acquisition cost significantly. In a way, SIP provides a mental comfort to the investor because he does not have to worry about bouts of volatility. A salaried person becomes more disciplined financially with SIP. This helps him to achieve his life goals without any stress.

Another reason in favor of SIP is that it is impossible to time the market. During times of volatility, investors defer lumpsum investment hoping for more market fall. This might work sometimes, but it is not advisable to pursue this strategy. There is always a chance of being left out. This is precisely why SIP investors are more successful in achieving their life goals.