The stock market has been on a roller coaster ride for some time now, with the BSE Sensex fluctuating by almost 1000 points every day for the last few days. At this level of volatility, you might be wondering whether to invest or wait for the market to calm down.
Actually, it is the inherent nature of stock markets to be volatile. With every dip providing an opportunity to invest, higher volatility gives investors a chance to get a higher return. However, the chance of losing money is also high if an investor doesn’t have capacity to withstand a notional loss, which is mostly short term in nature.
The most important rule of investing is to get your money in at the right time to optimise gains. So, when the market dips, you may optimise your return by investing more.
Smart investing is all about riding the trend. So, without missing the opportunity by waiting for market corrections, it’s better to invest regularly.
It’s also said that people lose more money by wasting time in their quest for time the market than the market corrections itself. So, the best way of taking advantage of the market volatility is to invest through Systematic Investment Plan (SIP) in a suitable equity-oriented mutual fund (MF) scheme. Depending on different financial goals, different SIPs may be started in different MF schemes.
As investments are made in regular intervals through SIP, money gets invested in both high and low market cycles.
While the value of total investments go up during up market, investors get the benefit of getting higher units during down market.
The benefits of continuing your SIPs are as follows:
As the best way to get more return is to invest in a low market, you may purchase MF units at a lower Net Asset Value (NAV) owing to the recent equity market fall.
Higher Unit Allotment
At a lower NAV, you will get your money’s worth by accumulating more units.
Optimise Potential Returns
With higher units in your portfolio, you will have the potential of getting a higher return when the NAV goes up. You may take advantage of the current down market and make additional investments to optimise your potential returns.
So, you should continue your SIP as you can purchase more units for the same fixed amount you invest periodically.