SIP Strategy Not Working : Equity mutual funds are known for giving high returns. In equity mutual funds, investors’ money is invested in shares. In today’s era, to make mutual funds easier and safer, Systematic Investment Plan i.e. SIP is becoming popular among investors. SIP is a long term investment, which increases the chances of getting high returns. But keep in mind that equity funds are linked to the stock market, hence there is risk present in them. However, if you invest in mutual funds through SIP with a long-term goal, then investors have more chances of getting high returns. But in some cases, there is a possibility of loss for investors in mutual funds also.
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When the SIP portfolio in mutual funds starts causing losses to the investors, sometimes especially the new investors get nervous and they start selling their units or withdraw their entire investment. But this step can spoil the financial planning of those investors and they fall behind their targets. Instead of panicking, selling the unit or taking wrong decisions, in these cases, experts talk about focusing on such measures, which will first bring your returns back on track and then also achieve the target set by them.
It is important to be patient in investing
The first step to successful investment is to keep a calm mind and maintain patience even in challenges. Fluctuations in the stock market are a common phenomenon, which is seen from time to time. But if we look at long-term history, the markets perform well. In the short term, the price goes up and down due to volatility. While mutual funds incur losses due to volatility in the short term, if you look at the long term, you can see only positive returns after holding for 3-4 years.
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Do not sell the unit in a hurry
You can suffer short term losses in mutual funds in a falling market. But this means that you should cash out your investment. In most cases, an exit load of 1% is applicable on equity mutual funds redeemed one year before the investment.
Some investors believe that when the value of a mutual fund goes down, they can withdraw their money from it, but the result is not good. SIP frees you from market timing. It also leverages rupee cost averaging for you to buy more units when the market is down.
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Compare your fund’s performance with other funds
In case of negative returns, compare your mutual fund scheme with other mutual fund schemes in the same category and in other categories. If you find that your mutual fund is slightly underperforming compared to the best rated funds, it may not be necessary to switch. If there is a significant difference in performance, consult an advisor before switching.
Identify market trends
If we talk about equity, then fluctuations in the stock price are due to the general trend of the market. Compounding works for you when you are on the right side of the trend, whether it is a rising or falling market. Therefore, the first step is to assess the true trend of the market, you have to identify whether the market is in a bull trend or a bear trend. Then invest with the same trend.
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diversity
Diversity is also very important for successful investment. For this reason, while investing in mutual funds, emphasis should always be laid on diversifying the portfolio. For this, different categories of funds can be considered. You can also consider keeping multi cap and flexi cap in your portfolio.
Research the sector and stock
If you invest money in any sector or investment option only after seeing the returns, then this is not the right way. An option that gives high returns for some time can also give negative returns in the next few days. Therefore, first find out which companies’ shares are in the portfolio of the fund in which you are investing. Whether those companies have the ability to remain ahead in the market for a long period with high growth or not. After that, one should compare the fund’s past performance, outlook and expense ratio. Also consult a financial advisor before investing.
(Source: Financial Websites Blog)
