While market volatility has made investors nervous, experts say stopping SIPs at this point in time will be counterproductive.
“SIPs help investors take advantage of market lows. The monthly investment of Rs 10,000 will fetch more units for SIP investor when markets
are in a corrective mode. When the markets
climb, the same Rs 10,000 will bring in lesser units. This is how rupee cost averaging works in SIPs and can help investors in bringing down their overall cost of acquisition,” said Swarup Mohanty, chief executive officer of Mirae AMC.
Advisors add that the near-term volatility can work in favour of SIP investors who have a long-term investment horizon.
“A small spike in the markets can considerably improve the return scorecard for SIP investors. For instance, a technology sector fund run by one of the top AMCs had given flat SIP return for nine years. When the markets recovered, this scheme’s SIP return jumped to double digits,” said Srikanth Matrubhai, Bengaluru-based mutual fund advisor and distributor.
Experts add that investors who have started SIPs recently shouldn’t be too worried by the near-term performance.
“SIP returns are adjusted for time value of money and annualised. So, returns appear amplified when seen in shorter time-frames,” said Vidya Bala, head of mutual fund research at FundsIndia.
While there has been a rise in applications for discontinuing SIPs in recent months, the contribution through SIPs showed a marginal improvement to Rs 77.3 billion in September over Rs 76.6 billion in the preceding month. According to the latest figures, the tally of SIP accounts in the mutual fund industry stands at 24.4 million.