Timing A ‘SIP' EXIT

Investment is made with the aim of either generating superior returns or achieving your financial goal. Taking into consideration these quantitative and qualitative factors will help you achieve both. The following article provides a guideline about managing your SIP for a fund

The stock market around the world has been on a roller-coaster ride in recent times. On account of the pandemic that has gripped with globe, investors have been witness to sharp downturns in the months of February and March, which also included indices hitting the lower circuit a few times. However, in the month of April, we saw one of the biggest monthly gains of the decade. In the meantime, one of the worst sufferers of this volatility is the SIP investor who has dutifully and religiously remained invested during all this turmoil.

The SIP returns for equity investors in the last three and five years on an average have been negative, except for a few pockets that have generated positive SIP returns. Even in a 10-year period, SIP returns for most of the categories failed to beat the normal bank fixed deposit returns. Investment is all about generating positive returns, if not in a shorter period then definitely over a longer duration. But if even after five years you are staring at negative returns on your investment, there definitely seems to be a need to re-strategize your wealth creation plan.

The Right Timing

Many advertisements and advisors will surely make you believe that SIP in an equity fund is for the long term and it should be allocated towards achieving your long-term goals. The mantra is that it should not be disturbed. However, it is not a theory cast in stone and hence you need to be flexible about SIP and the amount accumulated through such an investment. One of the biggest disadvantages of investing through the SIP route is that you invest a fixed sum of your money into equity markets, irrespective of the position of the markets. Whether the equities are available at higher or lower valuation, you end up investing the same sum of money every month. And so you buy irrespective of market valuation.