Markets are a roller coaster ride of ups and downs.
For many, these fluctuations seem random and potentially very stressful but, success in the stock market is ensured if we see past fluctuations to study the larger picture for a longer term.
When markets experience a low, most investors pull their money out of the existing investments because of low returns.
There are various reasons to continue an SIP even during falling markets or even to start a new one!
Investment during falling markets:
- Investment in new funds can be beneficial when market is in low phase. Because of the NAV being low, more units can be bought with less amount invested.
- Holding an Investment is advisable, because when markets catch pace after hitting a low, they tend to give better returns, added onto the returns already earned by the investor.
Given Below is an illustrative example of holding certain investment during falling market phase and continuing it, versus stopping SIP in those investments.
Assuming 2 scenarios- Mr. A and Mr. B’s Investments, where both start an SIP of Rs.10000 on the same date in certain funds.
Mr. A pull his money out during falling markets, but Mr. B waits for the markets to revive and continues his SIPs for a little longer period.
*Values taken according to NAVs as on ‘Start’ and ‘End’ dates.
Don’t underestimate the power of SIP
Let it compound !