Should You Withdraw Your SIP in a Volatile Market?

An important question that crosses investors’ minds during volatile periods is whether they should withdraw or pause their SIPs and start afresh when things get back to normal. Read to know what you should do!
Should You Withdraw Your SIP in a Volatile Market?

Continuing to pour money into the markets during difficult times takes a lot of courage, but it will be like taking short-term pain for a long-term gain.

So, should you withdraw your SIP during a volatile market? Well, the answer is ‘No’.

We list some valid reasons why you should not do so and stick to the path of discipline!

Helps in Accumulating More Units
Withdrawing your SIP investments during volatile markets robs you of opportunistic times. It is only during extreme volatility that you accumulate more shares/mutual fund units at depressed prices. This helps in rupee cost averaging, i.e., lowering your average purchase price. Also, SIPs made during these challenging times will majorly contribute to your long-term returns sources.

For instance, if you started a monthly SIP in a mutual fund scheme in, let’s say, April 2019 but paused for two months of March and April 2020 when the lockdown happened, your total returns would have significantly reduced. This is because stocks were down by more than 40% for that short tenure but later rose sharply!

Uncertainties are like stock markets, so volatile times will frequently cross you.

Something or the other major event will happen almost every quarter globally. This does not mean that one should stop making investments. Instead, these events should be viewed as accumulation opportunities!

Eliminates the Market Timing Factor
You decide to pause your SIPs temporarily due to an adverse market event. But have you decided in advance at what point or market levels will you resume your investments? And if you are frequently doing so, you involve the market timing element in your investing journey.

So continuing your SIPs irrespective of market events helps you eliminate the market timing element. Also, the positive and negative events will gradually negate your purchase price over different periods in the long run.

Helps in Avoiding Regret
Another psychological benefit of continuing your SIPs during depressed market phases is that it helps in avoiding regret at later stages.

We can very indeed say that many of those reading this article might have regretted not investing additional money when the market went down during, let’s say, the global financial crisis of 2008 or the COVID-19 crisis of 2020!

One hack of avoiding this regret and staying on the course of regular SIPs is to think about what conditions would prevail a couple of years from now.

Fruitful for the Long-Term
Although it’s an unsaid part, continuing SIPs regularly will prove beneficial in the long run, the fruits of which can be enjoyed at later stages of life.

Five to ten years down the line, you won’t even remember that you purchased that particular stock or mutual fund unit at a slightly depressed or elevated price. Then why stress upon it so much?

So taking short-term pain for long-term gain by making continued SIP investments irrespective of market conditions is a worthwhile tradeoff!

Teji Mandi Multiplier Portfolio

Teji Mandi Multiplier

A basket of stocks of small and mid-sized public companies. This portfolio holds the potential to secure larger returns in the future as the companies grow.

1Y CAGR

Min. Investment

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₹399/month for 6 months

Teji mandi Flagship portfolio

Teji Mandi Flagship

A basket of 15-20 long-term and tactical stocks that are rebalanced regularly to adjust to the market changes.

1Y CAGR

Min. Investment

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