Should one invest in SIP if the markets are down?

It is a reasonably well-known fact that mutual funds are usually long-term investments and do see a few ups and downs in their lifetime. When asked whether it’s alright to invest in SIP when markets are down, we present a slight contrarian viewpoint.

You will a lot of people talking about the many benefits of investing through SIP. Ignore them! SIP’s are great. However, it is a cash flow strategy (invest through SIP if you can’t invest a higher lump sum amount) rather than an investing strategy. SIP doesn’t help you average investments over time. For eg., the 12th installment has little effect on your average across all 11 installments previously debited.

Having said that, here are our observations:

  • Valuations are down and if you have a longer-term horizon, it’s a good starting point to add fresh positions.
  • Large caps in equity and liquid funds (or ultra short-term funds) in debt present the best risk-reward balance currently.
  • DO NOT blindly choose funds based on past performance. Read more about this here.

If you were to ask us, the best funds in the above-mentioned categories are:

Large Cap:

ICICI Prudential Focused Equity Fund [Has underperformed in the past few years, but concentrated undervalued portfolio should outperform in the FUTURE, which is what matters].

Liquid Fund:

Aditya Birla Sunlife Money Manager Fund [Ultra short-term tenure portfolio benefits even when interest rates rise].

The funds recommended above are not the run-of-the-mill funds that are preached by every other ‘advisor’. These recommendations are made with a high degree of conviction, strong research and experience. Do visit Moneyjar, our online investment platform, where we relentlessly fish out best-in-class mutual funds for our users to invest in using the thought process mentioned above.


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