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Broke SIP for poor MF return? This is why you may regret it

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Several investors start their investment journey in mutual funds viaSIPsto build a significant corpus over time. They have realised that they cannot simply escape to the haven of bonds and fixed deposits if they intend to counter inflation.

Sadly, disappointing market cycles like the one we have been witnessing since 2018 tend to chip away at our initial standpoint. We often forget why we decided to commit to long-term savings into growth assets in the first place, and all sorts of behavioural biases begin coming to the surface.

Should I remain invested or should I exit?Should I stop my SIPs temporarily and restart them when the economy starts to get better? Should I wait for the COVID-19 crisis to pass before resuming my investments into risky assets?

Would I have been better off with a fixed deposit? These are just a few of the trivial questions that start to trouble even the most patient and rationale of individuals.

Before we get to why breaking your SIP could later make you regret, let’s quickly recall what is SIP. An SIP or systematic investment plan is a means to invest in mutual funds. Under SIP investment, a specific amount of money is invested in desired mutual funds schemes at pre-defined intervals for a period.

History is a living proof that if there is one constant in financial markets, it is reversion. In other words, what goes up, also goes down – and what goes down, also comes up. The only setback in the equation is this – it is next to impossible to predict when shocks such as the pandemic will unsettle the bulls in the market.

So, while it is quite frustrating to see thefutile years roll by, it would be a terrible imprudence to exit your investments when your financial goals are still years, or maybe even decades away. Experts say with a high degree of confidence that in the journey towards long-term investment goals, many more such downcycleswould appear, and will be followed by equally violent rises as well.

Instead of evaluating the opportunity loss of not investing in a low-risk asset class, pause for a moment and reflect why you picked a growth asset in the first place. The moment you frame the condition in this manner and measure your success in terms of percentage accumulation towards your goals rather than percentage returns on your investments, you would have made a significant leap in the direction of becoming a more successful investor.

In challenging market conditions, the resilience to remain on your journey to financial freedom comes from conceding how far you have come. Unfortunately, this becomes impossible without a goal-based investing approach and a financial plan.

Here is a concluding thought. Remember, it just takes just one good year to wash away several poor ones. The last thing you would want is sitting on the fence when that actually happens.Good times will definitely come; and when they do, you shouldmake sure that you earn returns on a vast corpus and not a small one.

That will make all the difference in achieving your financial goals and objectives. Happy investing!

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