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Why Mutual Fund Investors Should Not Stop SIP and Latest Information

Many investors are stopping their SIPs because they think a slump is coming. It has also been seen in the past that buyers stop their SIP purchases when the economy stops growing. But if you look at the results on mutual funds from 2008 to now, you can see that a slowdown may be the best time to put money into the market. Let’s see below for the Why Mutual Fund Investors Should Not Stop SIP in detail.

Why Mutual Fund Investors Should Not Stop SIP?

In a bad economy, how can SIPs help?

Recession is never a good thing. The economy may slow down, but if you invest in mutual funds through SIPs, it can be good for you. Rupee cost average is the most important thing about buying through SIPs. This is a way of buying where you put in the same amount of money on a certain date without thinking about the unit price of the fund. This is when you don’t try to time the market but instead put a set amount of money into it every month and leave it there for a longer time to get the benefits.

Let us look at how rupee cost averaging works to get a better idea of what this means:

You began putting money into fund A in January, and your SIP investment date is set for the 15th of every month. But because of the recession, markets started to fall apart, and unit prices kept going down. In the fifth month, June, they started to rise again. Now, pay close attention to how many units you get when the price drops.

The price dropped from Rs. 100 per unit to Rs. 95 per unit, and 105.26 units were bought instead of 100. This shows why it’s good to keep your money saved even when the economy is bad. If you are a SIP user, you should not stop your SIPs when prices go down because you will get more units than when prices are high.

Next, let’s look at a lump sum investment to see how SIP works in terms of reducing risk. Over the course of six months, Rs. 60,000 was spent, which was split into equal parts. Now, if you had put all of this money into the business on January 15, you would have gotten Rs. 60000/100, which is 600 pieces.

Due to the SIPs you used, you now have a total of 655.08 units at the end of the sixth month. By splitting your purchase into smaller pieces, you clearly made a profit of 55.05 units. You also cut down on risk a bit because you didn’t put all the money into the fund at once.

What makes you want to keep your money saved for a long time when you use SIPs?

You already know why you shouldn’t stop spending when the economy is bad. Next, let’s talk about why you should stay invested longer to get better results.

It’s possible that you and your friend both put the same amount of Rs. 10,000 into the same fund every month. Let’s call it Fund X. The slump made you stop the SIP after five years, but your friend kept it going for ten years. Let’s look at the results now:

Your friend who kept their money saved for ten years made more money and is now worth more than you. You’re right when you say you put half of your friend into it. But you haven’t gotten half as much back as your friend, even though you only put in half as much as he did. This is because of how returns are calculated, which helps returns grow over time.

In conclusion

Even though the recession is scary, it can also be good for you in the long run if you carefully plan your investments, stay involved, and keep an eye on your investments on a regular basis.

The only reason for this blog is to teach, so don’t take it as personal advice. There are market risks with mutual funds, so read all documents linked to the plan carefully. This is the brief information about the Why Mutual Fund Investors Should Not Stop SIP in detail.

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