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Is it wise to cut down my SIP investments now?

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Last Updated: Mar 27, 2020, 10.49 AM IST
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I have been investing Rs 18,000 via SIP for the last three years. Considering the current market scenario, would it be a wise step to decrease the SIP amount by Rs 10,000 for the time being?

I invest via SIPs in:
Mirae Asset Emerging Bluechip Fund
Kotak Standard Multicap Fund
SBI Bluechip Fund
Axis Bluechip Fund
SBI Equity Hybrid Fund
Axis Long Term Equity Fund

Which fund/funds should I pause for now?
-Soumen Das

You should never base your investment decisions on the prevailing market conditions. It is true that the market is going through a rough phase, and nobody knows what direction it is going to take in the coming days. However, stopping your SIP will not address the issue. Imagine, you were buying pricey stocks until two weeks ago, Now when the same stocks are available cheap, you are hesitating to buy it. This is what will happen when you stop an SIP during a rough phase in the market. Also, you can never predict when the market will hit the bottom. So, there is a chance that you may not re-enter the market at the right time or when it starts going up. Most investors join the party at the fag end and make poor returns because of this.

An SIP allows you to buy mutual funds units regularly. The basic idea of investing through SIPs is to invest in a disciplined way without getting influenced by the highs and lows in the market. When you start stopping your SIP and re-starting, you lose the advantage of averaging your purchase cost and maximize wealth. Always keep in mind that you cannot predict the market right all the time. Most investors actually get it wrong most of the time. That is the reason why the mutual fund industry has come up with the idea of SIP. When you start tinkering with the basic concept, you make it very complex. It might help you to feel good, but may not result in extra returns.

Use the opportunity to take stock of your situation. Make sure you have enough liquid assets and investments to take care of an emergency on the health or professional front. Also, ensure that you have chosen mutual funds based on your goals, horizon, and risk profile. If these things are in order, focus on your goals and continue with your investments.
(If you have any mutual fund queries, message us on ET Mutual Funds on Facebook. We will get it answered by our panel of experts.)

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