Recently the data published in one of the new websites said that 'New SIP growth falls 61% from April to December.' What does it mean? Does it mean that investment through SIPs is no longer attractive? Does it mean that Investors are moving away from SIPs?
There could be only two reasons for fall in Net SIP growth. Number of New SIP registration is slowing down and another reason may be that some investors are stopping their existing SIPs.
Historically it is observed that people start SIPs when the past performance looks good. When market is in bull run people start an SIP expecting the similar return in future. But market can never go up in linear fashion. There are going to be ups and down. Volatility is the part of stock market. So when market corrects and return in portfolio is negative or not as per expectation people stops the SIP and book the loss.
Remember! In long run correction is temporary and growth is permanent. But when you press the panic button and stop your SIP your temporary loss gets converted into permanent one.
Creation of wealth through SIP requires two elements in place; first good financial advice and second discipline. Returns from SIP is never going to be proportional every year. There would be few volatile years before you create a wealth. Those are the years where Investors needs to stay disciplined and stay invested. In fact, if you want to become even smarter investor you need to increase your SIP amount or add more money in your existing SIP folios. That would help you to accumulate more units and when market recovers your portfolio would grow even faster.
If you had started an SIP of Rs 10000/month in September 2010 in large cap fund (There were 43 Large Cap funds available), value of your investment of Rs 3,60,000 after three years would have been Rs 3,48,896. Many investors were in panic and stopping their SIPs due to this negative return. But those investors who continued their SIP for even one more year, the value of their investment or Rs 4,80,000 was Rs 6,99,858/- after fourth Year.
Market is always going to test your patience. If you lose your patience, you shall not be able to create wealth. Remember what legendary Warren Buffett has said when you are losing your patience, "Successful Investing takes time, discipline and patience. No matter how great the talent or effort, some things just take time: You can't produce a baby in one month by getting nine women pregnant."