How to deal with SIP investment risk, When mutual fund returns are hit by market volatility, investors can recover from it.
What will happen to SIP if market crashes?
The stock market trend can change anytime and anywhere. The market situation has changed a lot in the last few months. Till September last year, the Indian stock market was on a record trend; since then, the situation has changed.
On the National Stock Exchange, Nifty has lost 16 percent from its peak. Midcap and smallcap indices have also fallen. The same is true for Sensex. This decline has also affected mutual fund investments.
SIP Impact
Most mutual fund schemes have faced a hit to their average returns this year. Investors who have resorted to the SIP route of regular investment have also realized that their investment returns have declined. Many investors have said that their investment portfolio has decreased by 20 to 30 percent.
In particular, those who invested in the much-anticipated small-cap and mid-cap funds have felt the most impact. Large-cap funds and ELSS funds have experienced a lesser decline
The average return of funds across various categories has been negative this year. Small-cap funds have seen a negative return of 22 percent. This has definitely affected the sentiment of investors. First-time investors who were attracted by the market’s upswing have been shocked by this decline.
As a result, many have been forced to stop or withdraw from SIP investments. It has also been reported that there has been an increase in the closure of SIP accounts.
What is the way out?
Negative investment returns and losses will definitely worry investors. However, it should be kept in mind that stock investment is a long-term investment. In particular, it is constantly emphasized that the SIP method can withstand market fluctuations.
Experts also point out the opportunity to buy more units of valuable stocks during a downturn. Therefore, one should avoid panicking and exiting the investment; the right way is to continue investing.
At the same time, investors should examine their investment portfolio. If the fundamentals are sound, then there is no need to worry. On the contrary, if you feel that a change in the investment portfolio is needed, you should act accordingly. Especially, if the small-cap investment is high, it can be adjusted.
If the risk factor is high, hybrid funds can be considered. One should remember that there is a possibility of benefiting when the market recovers from a downturn and starts to rise. Instead of being afraid, one should realize that patience and investment discipline are important.
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