Stories
SIP in Loss After Two Years? Don't Panic, Re-evaluate Your Investment Strategy!
- •A mutual fund SIP showing a loss after two years does not automatically mean it has failed; equity markets can experience long periods of weakness.
- •Rupee cost averaging helps average purchase cost over time but does not guarantee profit or protect against losses.
- •The two-year mark is not a definitive deadline for judging an equity SIP's performance; focus on long-term goals and market conditions.
- •Review your fund's performance against its benchmark and category peers across different market conditions, not just recent returns.
- •Do not stop an SIP blindly during a market fall, as lower prices allow for buying more units, but also ensure the fund still aligns with your goals and risk appetite.
Key Questions Answered
Equity markets often experience long periods of weakness, and a two-year period is simply too short to judge an equity SIP's ultimate performance. Market fluctuations mean that a portfolio value might temporarily show a loss, which does not reflect what the investment could be worth several years down the line.
When markets fall, the same fixed SIP instalment buys more units, whereas fewer units are purchased when prices are higher. This mechanism helps average out the purchase cost over a period of time, though it does not guarantee profits or protect investors completely from market losses.
Investors should evaluate whether the fund aligns with their financial goals, suits their available time horizon, and matches their risk appetite. It is also important to properly review the fund's performance against its category benchmark and other similar schemes across various market conditions rather than fixating solely on recent returns.
