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Is It Time To Stop SIPs?

Mr. C.S. Sudheer | Posted On Tuesday, May 22,2018, 06:32 PM

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Is It Time To Stop SIPs?



Mutual Fund investors had a great year 2017. After demonetization, banks cut interest offered on FDs. The Government cut interest offered on small saving schemes like PPF, NSC and even SCSS. Many investors had no choice, but to turn to investments in mutual funds, especially equity mutual funds. Equity mutual funds give high returns at high risk.

Association of Mutual Funds in India popularly called AMFI, and responsible for educating and spreading awareness on mutual funds, launched the highly successful campaign called Mutual Funds Sahi Hai.

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Is It Time To Stop SIPs?

Mutual Funds Sahi Hai promoted investments in mutual funds via Systematic Investment Plans popularly called SIPs. SIPs allow you to invest small amounts regularly say once each day, month or fortnight in mutual funds. Mutual Funds Sahi Hai says, you can invest just Rs 500 a month in mutual funds through SIPs.

1. Investors are running away from mutual funds

You and other citizens invested a record Rs 6,222 Crores in mutual funds via SIPs for the month of December 2017. Citizens invested Rs 7,119 Crores via SIPs for the month of March 2018. Sadly, the amount dipped to Rs 6,690 Crores for the month of April 2018. There are 2.16 Crore Mutual Fund SIP Accounts in India.

Stock markets have been falling in recent times. Oil prices are hitting $80 a barrel, spooking retail investors. Many investors have stopped SIPs and are running away from the stock markets. Investors are asking these questions, Should I stop SIPs? How to withdraw money from SIPs? How to stop mutual fund SIPs online?  

SEE ALSO: Why You Lose Money Investing In Equity Mutual Funds?

2. Should you stop SIPs?

Before answering this question, take a look at the benefits of SIPs. If you invest in mutual funds through SIPs, you don't need to care if the stock markets are up or down. You get more mutual fund units when stock markets are down and less mutual fund units when stock markets are up. SIPs help you average the purchase cost of mutual funds.

The true benefits of SIPs are realized when stock markets fall. This is the time you get more units of the mutual funds. Why stop SIPs when this is the best time to make the investment?

Don’t worry about stock markets and continue investing in mutual funds via SIPs. Invest in SIPs for the long-term. (This is a time frame of 5-10 years). Stock markets move up and down many times in 5-10 years. This helps in rupee cost averaging. Now to the big question? How long must you run the SIP? You need to run SIPs for a minimum of 6 months. You can choose tenure of around 3, 5 or even 10 years depending on long-term goals.

SEE ALSO: Mutual Funds Sahi Hai?

3. Is it time to increase SIPs?

This is the time of appraisals and salary hikes. You could even get a bonus. What must you do with all this money? As the income grows, so must your investments. Do not worry about volatility in stock markets. Just as stock markets go up, they must go down. This is the rule of stock markets.

Use the opportunity of a salary hike/bonus to increase SIP amounts. Add a lump-sum to the mutual fund scheme where you are running the SIP. An investment in equity is for the long-term. SIPs are an excellent way of investing in mutual funds. Do not stop SIPs when stock markets are falling. Rather, increase SIP amounts in the mutual fund scheme. Be Wise, Get Rich.

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