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SIPs are giving negative returns; time to stop them?

SIPs in a gloomy market
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SIPs in a gloomy market

The bleak economic scenario and absence of any firm action plans from the central government is keeping the stock market in tenterhooks. Many investors have been calling their advisors asking whether it makes sense to continue with their SIPs when most pundits seem to have given up on the Indian economy.

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What SIP does, what it doesn’t
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What SIP does, what it doesn’t

Many advisors say there are investors who have not really understood the concept of SIP. Many of them believe that investing through SIPs guarantee returns. It is not true. SIP is an investment option that allows you to invest in mutual funds, typically in equity mutual funds, periodically. It helps you to invest in a disciplined manner without bothering about the prevailing market conditions.

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Does it make sense when there is no hope?
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Does it make sense when there is no hope?

Many market players give up on markets on a regular basis. Many had predicted long winter when the global economy tanked in 2008. Now, many pundits are giving up hope because of trade wars, likely recession in the US, Brexit, absence of any stimulus by central government, and so on. The pessimists could be right. Or they would be proved wrong again. However, one thing is certain: the market would bounce back over a long period. And you are investing in equity for your long-term financial goals.

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Can’t I stop and start SIP later?
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Can’t I stop and start SIP later?

Yes, it is very tempting to stop your investments in stocks when the going gets tough. However, the question is when you will get back to the market. Do you have a certain level in the market in mind? Or do you have a time frame to get back to the market. Sorry, to disappoint you. But you may not be able to execute this smoothly. The market need not hit the level you have in mind or it might bounce back or tank further when your time comes. That is why many veterans say it is not easy to time the market.

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Don’t forget the sole objective of SIP
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Don’t forget the sole objective of SIP

You should ask this question: why am I investing through SIPs? You know that you are using SIPs to invest in equity to invest in a disciplined manner without bothering abut the market conditions. If it still holds true for you, why are you trying to alter your strategy? If you have been investing for a long time, say, a decade, you would know such times will come and go. And the lower market offers you chance to buy more units and enhance your returns. Don’t buy into the extra pessimism. Remember, your investment objective and stay on course.

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