2 days ago
Nifty’s Eight-Week Fall: How SIP Investors Should Respond
The Nifty 50, a group of major Indian stocks, has fallen for eight weeks in a row.
Some people who invest a set amount regularly through SIPs may wonder whether to stop or change their payments.
Sanjiv Bajaj says a falling market alone is not a good reason to stop if your plans and finances are still steady.
When prices are lower, the same SIP amount can buy more units.
But people who have lost income or need cash may need to put liquidity first.
Investors should not raise their payments just because the market has fallen.
If they have extra income and a long time to invest, they could consider a small, gradual increase.
They should also check their emergency savings, insurance and goals.
A fund should be reviewed for lasting problems, not just a few weak weeks.
The Nifty 50 has declined for eight consecutive weeks, prompting questions about whether SIPs should change.
Sanjiv Bajaj advises investors not to stop SIPs solely because markets are falling, if their circumstances and goals remain stable.
Continuing an SIP through a correction can buy more mutual fund units at lower prices; stopping also leaves investors to decide when to restart.
A higher SIP may be considered gradually if income allows, the investment horizon is long, and emergency savings, insurance and monthly commitments are in order.
Review a fund for sustained underperformance or changes to its manager or strategy, and review portfolios periodically rather than reacting to short-term market declines.
- Who
- SIP investors and Sanjiv Bajaj, Joint Chairman and MD of Bajaj Capital.
- What
- Guidance on whether investors should continue, increase or review their SIPs after the Nifty 50 fell for eight consecutive weeks.
- Where
- India; the article discusses the Nifty 50 and mutual fund SIP investing.
- When
- After the Nifty 50's eight consecutive weeks of declines; no specific date is stated.
- Why
- Investors are weighing how to respond to a prolonged market correction without making decisions based only on market sentiment.
Reasons to maintain or increase SIPs
Reasons to pause or avoid increasing
Continuing during a correction
Reasons to maintain or increase SIPs
If finances and goals remain stable, continuing may let the same contribution buy more units and avoids having to time a restart.
Reasons to pause or avoid increasing
If someone loses a job, faces an unexpected expense or needs to preserve cash, prioritising liquidity may justify pausing.
Increasing contributions
Reasons to maintain or increase SIPs
Investors with genuine surplus income and a long horizon may consider a gradual SIP step-up as income rises.
Reasons to pause or avoid increasing
A market fall alone is not a reason to increase contributions; stretched budgets, expensive debt or near-term goals call for caution.
Changing funds
Reasons to maintain or increase SIPs
A review may be warranted after sustained underperformance or a material change in the fund's manager, strategy or portfolio.
Reasons to pause or avoid increasing
A market-wide decline or a few weeks or months of weak returns is not, by itself, enough reason to switch funds.
Key facts
- Market movement
- The Nifty 50 fell for eight consecutive weeks.
- Expert quoted
- Sanjiv Bajaj, Joint Chairman and MD, Bajaj Capital.
- General SIP guidance
- Do not change or pause an SIP solely because markets are falling if financial circumstances and goals are unchanged.
- Potential benefit of continuing
- A fixed investment amount can buy more units when prices are lower.
- When an increase may be considered
- When income permits, the investment horizon is long, and core financial protections and commitments are in place.
- Fund review
- Consider sustained underperformance or changes in the fund manager, strategy or portfolio characteristics.
- Suggested review frequency
- Periodically, perhaps once or twice a year, rather than in response to every market headline.
Quotes
Sanjiv Bajaj
Joint Chairman and MD of Bajaj Capital
“The best SIP is not necessarily the biggest one; it is the one you can continue comfortably through different market conditions.”
livemint.com
“But if the only reason for pausing is that the headlines are making you uncomfortable, I would say stay with your plan.”
livemint.com
Sources
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