While many people think that investing is all about timing the market, and that this also applies to systematic investment plans (SIPs), one must understand that a mutual fund SIP is all about discipline investing. You choose an amount and a frequency, usually monthly, and consistently invest in the mutual fund scheme of your choice, regardless of market conditions.
Here's what Sahil Kapoor, Senior Executive Vice President, 360 ONE Wealth says about investing in mutual fund SIPs:
"Timing the market can be futile due to the transient nature of market events and the inherent difficulty and ineffectiveness of accurately assessing every market movement. Conversely, regular investments in the form of SIPs, regardless of the prevailing state of the stock market, aid in systematically building wealth over the long term. Creating and adhering to a suitable asset allocation strategy also ensures that you are systematic in your investment process and can avoid behavioural biases associated with market fluctuations. On the other hand, a few asset managers offer a Smart SIP option, which essentially increases the SIP amount during market corrections. This may be beneficial for investors who have a long-term investment horizon."
Point to note
While it is impossible to determine the perfect time to start or end your SIPs because the market is unpredictable, one must link their SIP investments with their long-term and short-term financial goals and achieve them over time.
Thus, one must not temporarily let market setbacks hinder their investment goals. If your investments are spread out over time and diversified, one bad year is less likely to derail your entire plan. Therefore, consistent and frequent SIP investments are crucial, especially during market volatility.