Being Systematic With Investing

Volatility is an inherent component of the financial market. A variety of domestic and international variables might contribute to market volatility. In the current scenario, geopolitical uncertainty, rate hikes, and mounting inflationary pressures are putting investors’ patience to the test. Despite the volatility, net inflows i.e. investments into equity mutual funds increased to ₹18,529 crore in May, up from ₹15,890 crore in April, according to Association of Mutual Funds in India (AMFI) data. It is normal to be scared when your investments are in red during a tumultuous market.

When markets get volatile, many investors question their investing decisions and even consider cancelling their SIPs or redeeming money from their funds. But, wait! If market volatility is wearing you down, know that predicting the market is more unpredictable than weather forecasting. And we have been trying to predict the weather for many more years than the stock market. Staying put with your systematic investment plan (SIP) is a good idea, especially in a declining market, because you can gain more units with the same amount of SIP money. And when the markets make a comeback, because you hold more fund units, your investment value will also appreciate.

As a result, sticking to your SIP is most likely to be the best option. Here are some reasons why you should continue your SIP investment despite market volatility:

Averages out the Cost of Investment
SIP is a method of investing in which a set amount is invested at a predetermined date. As a result, when the markets are down, and the unit price or net asset value (NAV) of the fund is low, an investor is able to accumulate more units, and when the markets are up and the NAV is high, one gets fewer units. The process is known as rupee cost averaging. The investment cost is essential because our investment gain will depend on the investment value at the exit and the investment cost. So, lower the average acquisition cost, higher will be the gains. By investing in a chosen fund through SIP and staying invested across a market cycle, an investor is better poised for gains over the long term than wasting time by trying to time the market.

Disciplined Investment
Investors who are unfamiliar with market swings avoid buying or resort to selling their investments when market is in a correction mode. In reality, such times should be used to increase exposure to quality investments. Even market moguls despite their vast experience cannot predict market movements consistently. By engaging in SIP every month, the investor tends to be consistent and disciplined with the investment. Remember: Focus more on your goals and less on the market.

Get the Benefit from Compounding
Compounding refers to an asset’s potential to generate returns that are then reinvested to generate higher returns. By staying invested in the market for long term an investor gets to benefit from compounding regardless of market fluctuations.

SIP makes Market Timing Irrelevant
When it comes to equity investing, one of the most challenging things to figure out is when to invest. Apart from that, there is the issue of where to invest. While investing in a mutual fund solves the dilemma of where to invest, setting up SIP solves the problem of when to invest. By investing through the ups and downs of a market cycle, an investor tends to be in a better position than trying to time the market.

SIP is for Every Investor
SIP makes it possible to invest even an extremely modest amount (as little as ₹100) in mutual funds. So an investor need not wait till gathering a more considerable sum for investing. This makes investing easy and accessible for one and all. With time as the resources improve, investors can opt for a higher SIP amount to generate wealth and fulfil financial objectives.

Conclusion
In the journey of investing, we cannot wish away volatility but what we can do is to make the right set of decisions to reach our financial goals. One can also look for ‘step up’ SIPs to automate increase in SIP contribution with expected growth in income every year, thereby increasing the chances of creating more wealth and potentially negate erosion of value of money on account of inflation.

The writer is Founder, MMW Financial Services LLP& Co-Founder, Samyag Financial Services LLP & ALT Financial Services LLP
Email : visheshgandhi@makemywealth.online
Website : www.makemywealth.online