What to do when SIP is not working?
The Systematic Investment Plan (SIP), today, has become one of the best options for people from investment or retirement to future planning. But have you ever thought what will you do if SIP does not give you the desired returns or if you lose the money invested in SIP? If this happens, what is the way to prevent it?
SIP calculation based on past data.
A fixed formula for correcting any type of calculation or speculation is that the possibility of it being correct must be maintained long into the future, so that when the time comes to verify it, you do not remember the calculation itself. Something like that is the same. the case of SIP; Whatever future calculation you get today in SIP, it is done on the basis of last 20 years’ records.
Just as in SIP it is said what is the average return of the stock market over the last 20 years, the future is predicted based on this. But sometimes it may happen that in the future the market will not work as before.
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It is also possible that your SIP is investing in a cycle where market conditions are not right. Or it is also possible that the market conditions are not favorable at the time when you need to withdraw money from SIP. So, will your SIP work?
According to a news report by ET, when you see 5 consecutive bad years in the stock market. When you see your investments drop, it also has a psychological effect on you. In such a situation, SIP does not seem as good an option as it seems, calculated on the basis of data of the last 20 years. It is not easy to know the future, especially in equities.
When does your SIP money stop working?
If you want your SIP to give the right results as per your calculations, then you need to understand what problems, apart from inflation, your investment will have to face in the next 20-25 years. What matters more than whether SIP gives the desired results is what the market movement is.
Note that any SIP scheme is good only when the shares bought high in the bullish phase are averaged out by buying more shares in the declining phase of the market. A basic principle works in SIP i.e. first build corpus for 10 years, grow. the corpus money for the next 10 years and then withdraw it. If the market does not support you on any of these points in the future, your SIP will not give the desired results.
What are the measures to prevent this?
If you want your investments to support you well into the future, the most important lesson is that you need to diversify your portfolio. For example, part of your money should be saved in stocks, part in FDs, part in bonds, part in real estate and part in gold. Not only this, if you are also investing in SIP, then you must have different types of funds, which will give balance to your investment. Apart from this, during the psychological pressure of recession, more investments in SIPs will need to be made.
