In these abysmal times of ongoing pandemic and unstable market dynamics, the markets have been highly affected due to the investor consternation and fall in demand. It is said that around 59 lakh SIPs have been stopped, however, it has been observed that at the time when many SIPs have been either stopped or paused there has been additional inflow made by some investors cushioning the SIPs inflow. We would like to suggest some reasons you should consider before deciding whether you should continue your investment in SIPs or not.
Lower Valuation One of the prime causes leading to the discontinuation of SIPs is the fall in the values of your investment. Before going more into this let’s briefly talk about the nature of the bearish phase that the country is going through at the moment. The important characteristic of the bearish phase is that it is temporary and after the end of such phase there is always a bullish market where the overall market is highly satisfying. This means that currently, the stocks are available at lower prices than what they were at a month ago. Such circumstances could be seen as a chance to invest in more units at lower costs.
Constant Benefits from Power of Compounding Known as the 8th wonder of the world, Compounding is one of the major reasons to continue investing irrespective of the market volatility. By making regular investments and reinvestment of the returns generated on such investment, the power of compounding helps the investors in making contented returns.
Essence of long-term growth The markets have always been volatile and subject to uneven fluctuations, however, one thing that has always been static in this environment is the immense potential for wealth creation. It is said that in the past 40 years irrespective of multiple recessions and downfall of the economy at various situations the investors have gained an overall 16% compounded annual returns in S&P BSE Sensex since its inception.
Lack of Re-Investment Alternatives If one decides to withdraw the funds there should be an alternative for the use for such finds otherwise the main objective of investing it in the first place won’t be accomplished. If the sole reason was the factor of fall in markets it is advisable to consult your professional fund manager before making any rash decisions.
Opportunity to earn more As discussed earlier the bearish phases do not sustain for long, which allows you to buy some good stocks at currently low market prices but apart from this there is an additional chance of averaging out the total cost of portfolio. It is highly possible that due to high market prices you might have overpaid for your holdings and now could be a good time to make up for the additional costs incurred.