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Feb 21, 2019 3 min read

New SIP Investors Fearing Current Volatile Markets. What Should You Do?

Read to know what new investors should do in times of current market volatility.

What Is Happening to SIP Investments in the Past Few Months?

In the month of December 2018, a little more than Rs 8000 crore were invested through SIPs, however, the pace of the inflows slowed down. The data is clearly predicted due to the number of new investors in the industry. In between May and September, nearly 10 lakhs new investors were added to the industry via SIP investment. This number reduced to 7.58 lakh new SIPs in November 2018 and 7.23 lakhs in December 2018. Along with this, around 5.36 lakh SIPs got discontinued in December 2018 alone.

So, why are investors seeking an exit gate? Investors who have started investing in SIPs in the past 3 to 4 years are either sitting on losses or have earned abysmal returns. According to a report, if an investor had invested in any one of the largest 20 mutual funds, he/she would be facing a loss of about 6 percent.

As India heads into the General election year in 2019, the market can remain volatile as predicted by experts. So, if you too are tasting the loss in mutual funds for the first time, it’s time to remain calm and invested as the NAVs are lesser as of now, which means it is your time to accumulate good units in less amount for a long run.

The market cycle works on this principle. No need to raise red flags seeing losses or volatility, instead it’s time to be patient if you don’t have any emergency requirement.

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What Role Does Patience play in SIP Investment?

The only trick to make your SIP work is to be patient. Let’s understand it with the same example of the 20 largest equity mutual funds.

Assuming you have started investing through SIP in January 2007 during the rising market. If you would have panicked seeing the market crash in 2008, then you would have made a loss of around 33%. In case you would have continued till 2011, you would have made a gain of approximate 4%.

However, if the same would be continued until 2017, you could have earned a profit of around 16%. This clearly states how patience offers the greatest reward of higher returns in case of Systematic Investment Plans.

What Should New Investors Do?

Considering the example above, it must be clear to you that SIP is the option for you only if you have the patience to stay invested even in volatile times and a long-term investment horizon. The market movements are unpredictable, so new investors should either avoid investing in SIPs if they need money before 5 years, or they should invest with a long-term horizon in mind. Investors make logical plans when they start investing in equities for the first time, but as the market goes down, it becomes difficult for them to see their investment values going down.
Further, they often invest in greed looking at the past returns and carry excessive expectations from mutual fund investments. They must remember that good food takes its own time to cook. Thus, remaining invested for a long term is the only sure-shot way to success in equity mutual funds.

In case you are willing to seek suggestions about where to invest, let us help you. We, at MySIPonline, offer customized plans suiting one’s own needs and investment objectives.

If you need an answer to your query concerning regular mutual funds, you can also write it in the form provided below to get a quick answer. Happy Investing!

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