Avoid Panic Selling: Stay the Course with SIPs
Market downturns can be unsettling, but impulsive decisions can harm your finances. Resist the urge to stop SIP contributions or redeem investments prematurely.
Why?
1. SIPs are designed to navigate market volatility through rupee cost averaging.
2. Continuing SIPs during market lows allows you to buy more units at a lower NAV.
3. When the market recovers, accumulated units can yield substantial gains.
Stay disciplined, and let your SIPs work for you!
Staying Invested: A Key to Success
A study by Baroda BNP Paribas AMC reveals:
– In the last two decades, the NSE Nifty 50 Index experienced 13 drawdowns of over 10%.
– In 11 of these instances, the index showed positive returns after one year.
– 9 instances yielded double-digit returns, with an average return of 21%.
– Extending the time horizon to three years after the drawdown, there were no instances of negative returns.
Why “Time in the Market” Beats “Timing the Market”
The data shows that staying invested is crucial for long-term success. Avoid timing the market and focus on staying invested to ride out fluctuations and capture potential gains.
Time in the Market: A Proven Strategy
Historical data shows that staying invested beats trying to time the market:
| Date | Drawdown | 1-Year Return |
| — | — | — |
| 18-Apr-05 | -11.12% | 82% |
| 19-May-06 | -13.51% | 30% |
| 17-Aug-07 | -11.10% | 8% |
| 15-Sep-08 | -35.23% | 20% |
| 03-Nov-09 | -27.42% | 35% |
| 14-Jan-11 | -10.42% | -14% |
| 08-May-12 | -20.79% | 21% |
| 24-Jun-13 | -11.44% | 36% |
| 07-May-15 | -10.44% | -4% |
| 17-Nov-16 | -10.19% | 27% |
| 23-Mar-18 | -10.17% | 15% |
| 05-Aug-19 | -10.14% | 2% |
| 20-Dec-21 | -10.08% | 11% |
| 13-Nov-24 | -10.14% | ? |
Key Takeaways:
– Staying invested for the long-term beats trying to time the market.
– Even after significant drawdowns, the market has consistently recovered and provided positive returns.
– Avoid making emotional decisions based on short-term market fluctuations.
