Keep Investing in Equity Mutual Funds through SIPs for your Long Term Goals

Do not stop your equity mutual funds SIP. Infact, this may be the opportunity which most of the investors wait. Volatile markets are always good for the investors if you are investing for long terms (long term means 15-20 years). Normally, in these type of markets, the investors ask 3 types of questions

1. Should I invest more as the markets have corrected in the recent past?
2. Should I withdraw the amount from mutual funds and stop my SIPs?
3. Should I keep continuing my equity mutual funds SIPs

Let us answer these questions one by one:

Should I invest more as the markets have corrected in the recent past?

I will not suggest you to invest lump sum amount in equity mutual funds at this point of time. The reason is very simple, I cannot comment on current market conditions.  It may go up by 10% in next month or it may go down by 10% in next month or it may stay at the current level for another 3-4 months. This depends on many local & global factors which are beyond anyone’s guess.

The markets are highly unpredictable. Whoever is suggesting you to invest more and more as it is the right time is either lying or jut making wild guess about the markets.

But if you want to increase your SIP at this point of time, there is no harm in doing that. If you have a lumpsum to invest for long term, invest it through Systematic Transfer Plan (STP).

Also Read: Equity Mutual Funds will never give you linear returns

Should I withdraw the amount from mutual funds and stop my SIPs?

Do not do this. These types of situations will come every now and then, if you are investing for long term goals let us for 15-20 years. Believe me, you would not even remember this type of market corrections after 3-4 years. Infact, you would feel happy after 3-4 years that you were able to continue your mutual funds investments and did not lost the opportunity.

These type of markets tests your patience which is the most important criterion for achieving your goals in the long-term goals.

Yes, patience and discipline are the most important criterion for achieving your goals and being wealthy. 1% additional returns will not make much difference for your long-term goals but 1% additional patience and discipline will definitely make difference in the long term

Don’t stop your SIPs and don’t redeem the mutual funds now.

Should I keep continuing my equity mutual funds SIPs

Yes, you should keep investing in mutual funds through SIPs. Though your mutual funds returns may be showing 0% returns for the people who started investing 2-3 years back or 2%-3% returns for the people who are investing for last 8-9 years. But it will not continue like this, the tide will definitely come in your favor if you are a long term investor.

In the investment journey of 10-15 years, there will be few years of negative return, few years of super high return and many years of average return. Nobody can predict which years are going to be good or bad. By investing for long term, you can average out your return.

Continuing your SIP will help you to become a matured investor. It would be easy for you to control your emotions, when the markets will go down next time.

I have personally seen 50% correction in equity markets in 2008. But it never affected my wealth creation goals.

Asset Allocation

This market also teaches us another lesson about asset allocation. I have seen lot of investors who keep investing in equity mutual funds for 3/4/5 years goals expecting 2%-3% extra returns than debt mutual funds or FDs. This is where the problem comes when markets go down suddenly, the returns are absolutely zero or negative and it impact your goals. Also, these type of markets does not allow us the rebalancing for short-term goals. That is the reason equity investments are not suggested for short term goals for 3/4/5 years.

Also Read: Asset Allocation by Age, Returns or Goals

At this point of time, there are 3 valuable lessons which market is teaching us.

1. Keep investing in equity mutual funds SIPs- Do not stop.
2. We have no control over market. We can only control our emotions and be a disciplined investor. Patience and discipline are the virtue to achieve your goals and become wealthy.
3. Do a proper asset allocation for your goals.

Having said that, this is another opportunity to shift your funds which are not performing well for last 3-4 years. You can review your funds at this point of time and take a decision as there would be hardly any capital gains on your equity mutual funds.

Again, don’t stop your equity mutual funds SIPs.

Keep Investing!!