Continue to invest in the mutual funds even when the market is at an all-time high because eventually, the market will rise, as will the return of the mutual fund.
The Indian stock market has more than doubled since the bad crash in March 2020 amid low-interest rates and liquidity. As the stock market hits an all-time high, several potential questions may creep into investors’ minds.
Pros of SIP
One of the main advantages of systematic investment planning (SIP) is the average cost of rupees it brings to investors. The average cost in rupees is a concept that allows investors to generate large returns on investment over a long period.
In SIP mode, an investor ends up buying fewer units of the mutual fund when the market is high than when the market is low, and vice versa – this averages the total cost of the mutual fund units over the A period.
Since it is virtually impossible to accurately predict market movements and distinguish market tops, an investor should continue to invest in mutual funds through SIP investment without any worries about the correction of the market. However, it should be ensured that they invest in mutual funds through SIP based on their risk profile, financial goals, capital availability, investment opportunities, etc., and not based on market price movements.
The ups and downs are a must-have when investing in stocks. Therefore, keep investing in mutual funds even when the market is at an all-time high because eventually, the market will rise, so will the mutual fund.
Meeting Market
While the stock market may peak in the short term, it is difficult to predict how long the rally will continue. Therefore, buying back all of your mutual fund investments or sitting on a large pile of money may not be ideal.
Remember that investing in mutual funds through pooling is a disaster for your portfolio if the market corrects suddenly and dramatically. On the other hand, investing in mutual funds through SIP can benefit investors regardless of market cycles and even if the market has a correction in the meantime.
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