“Investors with a long-term horizon should strongly consider topping up their SIPs during market dips, as this strategy can significantly enhance long-term returns. Market corrections provide an opportunity to purchase more units at a lower price, which can improve overall returns when the market eventually recovers. By regularly investing through SIPs and taking advantage of dips, investors benefit from rupee cost averaging, reducing the impact of market volatility over time,” recommends Sagar Shinde, VP Research, Fisdom.
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Another mutual fund advisor advises investors that topping up of SIP should not strain their financial situation and if they have limited liquidity and don’t want to take unnecessary risks, should continue with regular SIP investments.
“If you have additional funds and a long-term investment horizon, topping up your SIPs during market downturns can be beneficial. Buying more units at lower prices can enhance returns when the market recovers. Ensure that topping up your SIPs does not strain your financial situation. It’s important to maintain an emergency fund and avoid overcommitting to investments. If you have limited liquidity and don’t want to take unnecessary risks, regular investments through SIPs can help reduce the impact of market fluctuations,” recommends Adhil Shetty, CEO of Bankbazaar.com.
Amid the ongoing volatility in the market mainly due to weak US job data, and increase in geo-political tensions, mutual fund investors are concerned about their investments. The Nifty and Sensex ended in red on Monday and Nifty was near the budget day low. Experts recommend that the investors should not consider the budget low as an ideal entry point for making investments especially when the market valuations remain rich and should be cautious while deploying fresh capital in the market.
“Investors should not view the Budget-day low as an ideal entry point for making investments, especially in the current market environment where valuations remain rich. Despite the recent market correction, the price-to-book ratio remains above four, indicating the need for caution when deploying new capital. A more prudent approach would be to use Systematic Investment Plans (SIPs) and Systematic Transfer Plans (STPs) for deployment, which allows for gradual investment and reduces the risk of entering the market at a high,” recommends Shinde.
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The other expert recommends that selling out the investments during the market downturn can result in losses and miss the potential gains when the market recovers.
“In times of market volatility, it’s important for mutual fund investors to maintain a disciplined and long-term perspective. Historically, markets have rebounded from downturns. Selling during a downturn can lock in losses and miss potential gains when the market recovers. Ensure that your portfolio is well-diversified across different asset classes and sectors. Diversification can help mitigate risks associated with market volatility. Try to invest in quality funds as they are more likely to weather market downturns and perform well in the long run. Stick to your investment plan and avoid making hasty decisions based on short-term market movements,” recommends Shetty.
The Indian benchmarks – Sensex and Nifty – were down by around 3% on Monday after the rise in concerns over the unwinding of the Yen carry trade, combined with fears of recession in the US, geopolitical tensions, and concern of overvaluation.
The top-up SIPs allow investors to automate their SIP contributions and increase them in line with the expected growth in income. Using the top-up facility, any investor who has a SIP running in a mutual fund scheme can increase it by a fixed amount or percentage at predefined intervals.
In most top-up SIP cases, investors have the option of choosing at what intervals they want to increase their SIP amount. Top-up SIP may be beneficial for investors with a long term investment horizon. If you continue investing in mutual funds through top-up SIP for the long run, you may be able to get closer to your ultimate financial goal.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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