Mutual Fund SIP investment: Should Mutual Fund (MF) SIP investors be influenced by news reports of slowdown in the economy? Should they stop SIP? These are some of the concerns of first-time investors these days. Experts, however, suggest that first-timers must acknowledge the fact that markets remain volatile. It undergoes the cyclic process of ups and downs.
With Mutual Funds, investors get an opportunity to invest both in equity and debt. The downward trend in the market often fills a sense of dejection in equity mutual fund investors. And it is at this point when they start thinking of stopping their SIPs. However, experts advocate against stopping SIPs as bad news for the market today could become good news for investors in the long run.
Tax and Investment expert Balwant Jain is strongly against stopping SIPs. Jain told FE Online that SIP investors should stay the course. He even said that the very thought of stopping SIPs should never come to the mind of investors.
Jain explained equity MF investment with the example of a marathon. "Equity investment is for the long haul. In a marathon, you would see winners remain behind in the initial laps. But as the race comes to end, the winners come to the fore."
"It is not like Fixed Deposit where money keeps on increasing in your account till maturity. In equity MF, the value of your investment may go down sometimes, or may go up, but if you remain invested, it is bound to grow," Jain added.
SEBI-registered tax and investment expert Jitendra Solanki also told FE Online that SIPs should never be stopped. "One can benefit more from SIP when the market is down. If you have not got a return, it means the market hasn't performed. You can't take decisions based on 2-3 years of performance if you started SIP for 10 years."
Solanki strongly suggests against getting influenced with news of slowdown. "You will not always see a linear growth in equity investment. You may see a downfall. One should be ready for the downfall, if one invests in the equity market."
"Investments should continue even when the market is down. Suppose you keep investing when the market is down, you will become a gainer when the market goes up tomorrow," he added.
Have 6-7 SIP? What to do?
First-timers often start several SIPs and start worrying when they start falling short of funds to continue the investment, or when the market slows down.
Solanki said, "There is no need to have 6-7 SIPs, unless and until you have started them in different categories. Most of the people do duplication by starting investment in two or more SIPs of the same kind."
"One should diversify SIP only to the extent that it remains beneficial," he added.
Jain suggested, "In one category, the investor should have only one scheme. For example: You can have an ELSS scheme, one scheme each of Large Cap, Small Cap, Mid Cap, and one aggressive hybrid fund."