Market volatility often makes investors wonder whether they should pause or stop their mutual fund SIPs.
A Systematic Investment Plan invests a fixed amount periodically. When the NAV falls, the same investment buys more units; when the NAV rises, it buys fewer units. This is known as Rupee Cost Averaging.
For example, a ?1,000 SIP buys 50 units at an NAV of ?20, but 100 units when the NAV falls to ?10.
AMFI explains that regular investing can help investors avoid the tendency to stop investing during falling markets or invest excessively during strong markets. However, rupee cost averaging does not guarantee profits or protect against losses.
SEBI’s investor education resources also specifically address the importance of understanding SIP investing during volatile markets.
Bottom Line: Don’t stop a SIP purely because markets are falling. Review your financial goal, investment horizon, asset allocation and risk tolerance before making changes.
