Manually timing your SIP every month – Is it a good idea?


An SIP (systematic investment plan) is a suitable investment instrument that allows you to create wealth over a long time period. This enables you to develop a habit to save periodically and assists you to become highly disciplined with money. Your SIP investment uses the feature of rupee cost averaging to assist you to lower your overall investment cost.

An SIP is an investment route designed particularly for beginners for whom tracking the different market levels is tough. With an SIP, you can invest in mutual funds automatically at periodic intervals, which saves you from the stress and dilemma of timing your mutual fund investments based on market volatility. Owing to the rupee cost-averaging benefit, higher units in a mutual fund are bought during bearish market conditions and lower units are bought during the bullish phase. This benefit of averaging out your investments through an SIP prevents you from manually timing your SIP investments based on distinct market levels. So, no, it is not a good idea to manually time your SIP every month as the fundamentals of an SIP deal with preventing you from timing your market investments through the rupee cost averaging feature.

While an SIP avoids the requirement to time your investments, generally many out of panic tend to stop their SIP during falling markets. Read on to understand if stopping your SIP during bearish market phases is a good decision and when should you consider rebalancing your SIP.

Should you stop your SIP investment during falling markets?

A pause in SIP investment is a choice available to everyone. Many are unaware of this choice and tend to abuse this product. However, there are many who are aware of this available choice and tend to pause their SIP investments during unstable market conditions. Note that, this is not a prudent action to take.

Even during volatile market conditions, you must stick with your SIP investments. So, instead of pausing your SIP investments, you must continue with your SIP and top-up your SIP if you have investible funds to buy quality mutual fund units at lower value. Doing so would allow you to gain higher returns over the long time period once the market recoups.

You can use the pause feature in an SIP in scenarios only when you witness temporary monetary shortage or job loss. Pausing your SIP investments in such cases endows you with some relief while you can figure out ways to avail finances. Once you become financially stable, you can begin with your SIP mutual fund investment again.

When is the right time to rebalance your SIP investments?

A​n​ SIP comes with high flexibility, which is one of the major benefits you must note. With this investment tool, you get the freedom to alter your investment allocations based on market movements. For example, if you have a higher investment in equity mutual funds, then you can simply liquidate some of the equity fund units in SIP to purchase debt fund units through the SIP mode. You must consider rebalancing your SIP holdings only when your market investments are not in alignment with your asset allocation strategy. Getting back to your original asset allocation helps you generate the estimated returns for your financial goals.

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