Feeling down after seeing your SIP value plummet to all-time lows?
Well! You are not alone.
Markets have been volatile for a while now since the pandemic struck and has had its effects on businesses and the economy. Side effects of the tumultuous market are falling NAVs in your SIP investments. But, we all know how SIP’s work, these investments strive solely to benefit from Rupee cost averaging.
Consider this, for a monthly SIP investment of Rs.10,000 at a fund NAV of 10 you accrue 1000 units. In the consecutive month, the markets fall by 20%, your NAV is down to 8. So, in your next SIP instalment, you accrue 1,250 units, benefitting you by 25%. These NAV’s come into play delivering better returns once markets bounce back to normal.
Yes, it is tough to stay composed when markets are slipping to new lows, creating emotional stress enough to make one consider pulling out right away. But, by putting a pause on your SIP instalments in a falling market scenario, you are working in the opposite direction of your gain.
Keep on going
Pulling back now would mean missing out on the best opportunity to make most of your long-term investments.
So, why crashes make SIP s very happy & why SIPs must not be stopped, if not enhanced?
- Because in spite of these temporary setbacks your long-term goals and finances remain unchanged.
- You have enough time to let the values of your investment recover, especially from risky assets.