The Journey Towards Financial Freedom - Don't Stop Your SIPs

SIPs benefit from stock market downs and ups. Don’t let this down market cycle influence your decision to stop investing. Take a pause instead

Over the years, investments through SIPs (systematic investment plan) inequity mutual funds have become the new norm. The undisputed convenience and simplicity has without doubt acted in favour of this technique to invest.

Other advantages such as compounding and rupee cost averaging have been widely understood by long term equity investors who prefer investing in mutual funds through the SIP way. Several investors have benefited from regular long term investments and the number of such investors is only on the rise. Yet, there are many people who are new to investing, who do get anxious every time the stock markets fluctuate.

The anxiety experienced by new and even some seasoned investors during a volatile stock market phase are understandable. Instinctively, the first reaction of such investors is to panic and redeem their investments. Many others stop their future SIP instalments. Both the actions are uncalled for, going by how the stock markets have fared over the years. When one redeems SIP investments prematurely, they may incur an exit load as well as capital gains tax, which further impacts the worth of their investments.

Flipside of Stopping SIPs

* Impacts your financial goals.

* There is opportunity loss when you stop investing.

* You lose from the advantages of SIP investing like averaging, convenience, compounding and discipline of regular investments.

* You need to restart the SIP investment process by filling up forms and choosing a fund scheme.