Recently the data published in one of the new
websites said that `New SIP growth falls 61% from April to December.` What does
it mean? Does it mean that investment through SIPs is no longer attractive?
Does it mean that Investors are moving away from SIPs?
There could be only two reasons for fall in Net SIP
growth. Number of New SIP registration is slowing down and another reason may
be that some investors are stopping their existing SIPs.
Historically it is observed that people start SIPs
when the past performance looks good. When market is in bull run people start
an SIP expecting the similar return in future. But market can never go up in
linear fashion. There are going to be ups and down. Volatility is the part of
stock market. So when market corrects and return in portfolio is negative or
not as per expectation people stops the SIP and book the loss.
Remember! In long run correction is temporary and
growth is permanent. But when you press the panic button and stop your SIP your
temporary loss gets converted into permanent one.
Creation of wealth through SIP requires two
elements in place; first good financial advice and second discipline. Returns
from SIP is never going to be proportional every year. There would be few
volatile years before you create a wealth. Those are the years where Investors
needs to stay disciplined and stay invested. In fact, if you want to become
even smarter investor you need to increase your SIP amount or add more money in
your existing SIP folios. That would help you to accumulate more units and when
market recovers your portfolio would grow even faster.
If you had started an SIP of Rs 10000/month in
September 2010 in large cap fund (There were 43 Large Cap funds available),
value of your investment of Rs 3,60,000 after three years would have been Rs
3,48,896. Many investors were in panic and stopping their SIPs due to this
negative return. But those investors who continued their SIP for even one more
year, the value of their investment or Rs 4,80,000 was Rs 6,99,858/- after
fourth Year.
Market is always going to test your patience. If
you lose your patience, you shall not be able to create wealth. Remember what
legendary Warren Buffett has said when you are losing your patience, "Successful
Investing takes time, discipline and patience. No matter how great the talent
or effort, some things just take time: You can`t produce a baby in one month by
getting nine women pregnant."
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