When should you redeem SIP Investments?

SIP meaning full form is a systematic investment plan (SIP).  The meaning of SIP in investment is the most convenient mode of investing in mutual funds and has potential to generate long-term wealth. The investor develops the habit of disciplined investing and reaps the benefits of rupee-cost averaging. However, are subject to losses on account of market conditions and associated risks involved. What should an investor do? Should investor stop a loss-making SIP or continue with the SIP?

The following factors should be considered while redeeming SIP investments.

Asset allocation

This is a very important to meaning of SIP investments. Returns from equity-linked mutual funds are related to the performance of the stock market. So, if the market is not performing well, then your fund is also likely to follow the trend and provide low returns. Also, in equity funds, investing one’s funds in small or mid-cap funds or large cap because previous year returns were very good is not a good idea. Allocate your assets in a diversified manner. It should mostly be a mix of long-term, mid-term and short-term funds. Asset allocation varies from person to person. Investing in only one type of fund is not advisable.

When to withdraw

This is a dilemma faced by al investors. The answer lies in your fund performance. Follow the performance of the fund you have invested in. If the fund is not performing satisfactorily for less than a year, it could be the market fluctuation affecting it but if the performance is unsatisfactory for more long period than, you should consider looking for a better fund.

Apart from the performance parameter, you should also check the portfolio of companies in which the fund has invested and their prospective performance. Another good strategy is to compare your mutual fund’s performance with similar mutual funds. So be careful when you decide to redeem your SIPs investments and identify alternative funds.

Investment horizon

The longer one invests through SIPs in mutual fund has potential for long term risk adjusted returns. Generally, consider investing in SIPs for a period of five years or so. It has been observed that generally it takes at least five years to average out the losses and market risks and the power of compounding. A market correction phase does not mean one should redeem those funds. Rather, view it as an opportunity to purchase more funds at a lower price.

To conclude, one can suffer losses while investing in mutual funds but there is no need to panic and make a hasty decision. There could be many reasons such as elections and geo-political tensions, recessions, pandemics, etc. The economy has seen it all and still flourishes and thus investing is a long-term game and should be treated accordingly.

So finally, to answer the main question as to when is the right time to redeem SIP investments, ideally one should look at redeeming SIP investments only when the financial goals are achieved. If an investor wishes to take advantage of changing market dynamics, satellite portfolio could be used to switch to funds depending on market behaviour.


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Mutual Fund investments are subject to market risks, read all scheme related documents carefully.