Mutual fund returns are low or negative, should SIP be discontinued?

 

One of my clients is 40-year-old Satyendra Kumar Singh who started investing in mutual funds four years ago. He wanted to invest in it for 15 years, but the returns were not that much, which increased his concern. He wants to know whether he should stop investing in SIP (Systematic Investment Plan)? Due to COVID-19, this question is being asked again and again, because the stock market is uncertain, the economy is down, people's income is down and SIP is not performing well.

 

The main reason for stopping investment in SIP is because of the poor performance of the fund, loss of job or salary, economic uncertainty or decline in fund value. First, ask yourself why did you invest in mutual funds. There is a goal behind this investment. When you invest in a long-term goal such as buying a car, education or retirement of children, celebrating holidays abroad, the investment period is five to 20 years. Suppose you want to buy a car, which will cost Rs 7.5 lakh after five years. This will be a huge amount if you buy a loan. But if you want to buy a car after saving, then you have to invest every month. Investing through SIP makes people habit of small investment for a long time. The rupee-cost ratio is another benefit of SIP, that is, you buy more units when the market falls, and when the market arises, you are able to buy fewer units. This reduces the average cost per unit in the long run.

 

If you stop your investment by stopping the SIP, it means that you have missed the opportunity to make a profit from the stock market. In order to understand how the returns are made by investing at different times, we take the index fund of SBI Mutual Fund, SBI Nifty Index Fund. In which the performance has been given for 1,2,3,5 years and the time since the fund inception. There was no effect of inflation on him. This fund has given 11.10 in SIP.

If you cannot invest for the future due to lack of money, then you can try the option of SIP Pause (stop investing for two-three months) or you can stop investing in SIP till your financial condition. Does not get good. If the fund's performance is consistently worse than its benchmark (standard) and peers (other funds), you should think about investing in other funds. If you have less money, then put less money in SIP, but do not stop SIP suddenly.