Have you ever experienced buying a product, such as an electronic gadget or a mobile phone, for around ₹50,000, only to find it later available at a discounted price of, say, ₹45,0007 It's a common occurrence where m items purchased at one price are subsequently found at lower prices. Similarly, in the world of financial markets, you might plan to purchase shares of your favourite company, monitoring them closely for a month before buying. However, sometimes after your purchase, the share price drops below your purchase price, resulting in the shares trading at a discounted price compared to what you paid.
Furthermore, a similar situation may arise in your mutual fund investments. For instance, consider having a monthly SIP of ₹5,000 that you started a year ago. Despite 12 months passing, you find that the investment is showing a negative return or that the current investment value has fallen below the total amount invested. When faced with such a scenario, it's important to pause and carefully consider your options. If you haven't encountered this situation vet, it's fortunate, but it's also an opportunity to educate yourself and prepare for what actions to take if it were to occur. Looking for a strategy directly is not suitable for everyone. Firstly, investors should understand the factors that affect their investments in market-linked instruments such as stocks or mutual funds.
Understanding the Factors Contributing to Losses in SIP Investments
Before finding any strategies for managing loss-making SIPs, it's essential to identify the factors that can contribute to losses in SIP investments. SIPs, by nature, involve periodic investments at different market levels, meaning that your investments are not timed to perfection. Various factors can lead to losses, including:
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