Mutual Fund Tips: Systematic Investment Plan (SIP) is the most comfortable and convenient way to invest in mutual funds and raise funds over the long term. It promotes the habit of disciplined investing in investors and ensures the benefit of cast averaging. However, at times, investors in SIP also incur losses due to market fluctuations or any related risk. What should an investor do then? Should he stop or withdraw the loss-making SIP or keep the SIP running? These are the questions that bother investors. Let us try to find the answer.
This is a very important aspect of SIP investment. The returns from equity-linked mutual funds are a function of the stock market. If the market itself is not giving very attractive returns, then the equity fund you have invested can also follow the same. Another thing to be noted is that investing is not a good idea in view of past performance. For example, if Midcap and Smallcap have given good returns last year, it would be a wrong idea to invest most of your money in these funds.
It is better to invest your assets in a diversified way. It should be a mixture of long term, midterm and short term funds. This option may be different for each person. Because everyone’s investment goals or risk-taking abilities are not the same. Restricting your investment to just one type of fund is certainly not a very good idea. When investing, keep in mind your risk-taking ability.
When to withdraw money
This is the most asked question by investors. The answer to this question is that you must check the performance of your fund before attempting it. Track the performance of the fund you have invested. If the fund is underperforming for less than a year, it can cause market fluctuations. But if the performance is weak for more than 18 months, then one should look for another better fund.
However, this is not the only parameter when mapping the performance of a fund. You should also examine the structure and performance of companies in which the fund has invested. Another good strategy at this point is to compare your mutual fund based on the performance of the same mutual fund. When you decide on how to redeem your SIP and identify alternative funds, do a thorough exercise first.
The more time one invests in SIP, the better is the potential for returns. Generally, consider investing in SIP for at least 5 years or more. Apparently it takes at least 5 years to reduce losses and market risks. The benefit of compounding should also be seen at least 5 years. A market correction phase means when there is correction in the market, instead of capitalizing your investment, take it as an opportunity to buy more funds at a lower price.
It is possible that someone may lose money in mutual funds, but it should not be reacted immediately. Don’t make the wrong decision by looking at your portfolio in red. The result of such result can be due to election, geo political tension, slowdown, any epidemic like corona virus or other such factor. The economy has seen it all and still continues to grow. We can say that investment is a long term game and according to this, investors should make a strategy.