The phones begin ringing (as they always do) when markets become nervous. The only answer sought by investors is
·
Should I pause my SIPs? Or
·
Should I redeem and shift to cash and again reinvest
when market stabilizes.
Market
will find one or the other reason to justify the fall.
This time its tariff. The first casualty of a nervous market is SIP. The anxiety over tariffs issue has knocked off approx. 4000 points from Sensex
The whole logic of SIP investment is that since you cannot predict market movements so you spread your purchases across time so you average out your cost of purchase. So, when you suspend your sip during down turns, you’re negating the very logic of SIP which is meant to turn volatility into opportunity.
SIP investment is meant to get over behavioral tendency of avoiding loss in investments—even if for short term. SIP works because it aligns with your periodical cash flows (monthly sip for monthly cash inflows). You are not expected to stop your sip once you begin.
SIP fails to generate wealth for most investors when they stop their SIP and do not resume them at the right time. Investors usually wait for clarity, market to stabilize which effectively means waiting until NAV has recovered and window of acquiring units at a lower level has closed. But the irony here is that while the investors stop/pause their SIP, they continue making financial commitments in ULIPs; stock market etc
The solution isn't to ignore market conditions entirely – it's to understand that SIPs are specifically designed to work through them. If you genuinely believe in your chosen fund's long-term prospects and your investment horizon remains unchanged, temporary market corrections/weakness should be irrelevant to your monthly contribution schedule. If anything, it should reinforce your commitment to the process.
The next time market headlines make you question your SIP commitments, remember that these moments of doubt are exactly when systematic investing proves most valuable. The discipline to continue contributing when others are pausing often separates successful long-term investors from those who merely hope for success
A word for long term investor—It’s not your thinking that makes big money, it’s sitting.
