The Indian stock market has been scaling new heights in recent times while also becoming volatile at times, leaving a majority of the retail investors in a conundrum. A question often asked is whether they should stop their systematic investment plans (SIPs) to avoid potential losses at the peak. While the temptation to time the market and protect your hard-earned savings is understandable, stopping your SIP at a market high can be a costly mistake for several reasons. Just ask yourself a question: Have you invested or started investing when the market was at its lowest point?
If the answer is yes, then ask yourself another question: Did it fall again from your entry level? If yes, then your calculations regarding the market were wrong. So, why think about trying to time the market and press the pause button on the SIP, assuming it will fall? The market gains when it has strength and falls when it has weakness. Therefore, selling or taking a pause on the SIP when the market has good strength is probably not a good choice. SIP involves investors making regular, automated contributions to mutual funds at set intervals.
The primary goal of SIP is to benefit from the rupee-cost averaging, which means purchasing more units when the prices are low and fewer units when the prices are high. Another significant facet of SIPs, as implied by the name, is their systematic nature. SIPs are designed to offer a consistent and disciplined method for making investments. The current market level is higher relative to the historical levels. Looking ahead, there is potential for further significant growth. To benefit out of this movement, it’s crucial to maintain a long-term perspective, exercising both patience and persistence in your investment approach.
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