Nov 19, 2016 4 min read

How to Deal with the Market Volatility via SIP?

With demonetisation, the Indian stock market is facing great challenges. Know how you can overcome them by taking he SIP route.

The demonetisation move in the Indian economy taken by Prime Minister Narendra Modi has influenced the country to a great extent. With this, the stock market has suffered a great hit that it went down by 1600 points the first day after the announcement. Although it has stabilised its position back, yet the market and investments are prone to high fluctuations in the future as well. Thus, it is quite essential for everyone across the country to make a right and long-lasting decision which does not let their money’s worth fall down.

Market volatility puts a great impact on the investment values of the investors. There is a strong relationship between volatility and performance of the market. Volatility tends to diminish when the stock market rises and grows with the falling stock market. With an increase in volatility, the risk factors rise and returns start declining. Henceforth, it is crucial to take into consideration the market fluctuations while taking the decision of investing.

How SIP Helps in Countering Market Volatility?

SIP, i.e., Systematic Investment Plan, is one of the best ways of investing in mutual fund schemes. It facilitates the investors to make payment of a small amount at a regular interval which is invested in diversified investment strategies to gain wealth. The amount is automatically debited from one’s bank account at a pre-defined date. In this way, the investors get a chance to make an investment with a small sum of money instead of paying a lump sum all at once.

SIPs provide the best way of countering the volatile market due to its exceptional features. Here are some of the reasons, why investing in SIP can help you to deal with the market volatility:

Market Timings:

The ones who get shuddered with the fluctuations in the equity markets as happening in the present scenario but have the vision of long-term investing, then SIP can be of great help to them.

Being a trader, timing the markets is disastrous for the objectives of wealth creation as they can be fruitful until the last trade only. Nobody knows what shall be the value in the very next moment. Hence, we need to act smartly and systematically to gain considerable returns irrespective of market ups and downs; and SIP provides the same.

An SIP in mutual fund having steady track performance can be the only solution for overcoming the unstable market. It has been proved in the past years that SIP has offered great benefits even after suffering high volatility in the market as the SIP route enables you to even-out the fluctuations of the equity markets effectively.

Rupee-Cost Averaging:

To overcome the hits of a volatile market, SIP works better than lump sum mutual fund investments. The reason being the rupee-cost averaging. It provides a cushion against the changing market by averaging the overall cost of investment. Through this one can buy more number of units when the market falls and fewer units at the time of market going up. In this manner, the average cost of one’s investment is not affected at all and in fact gets reduced due to averaging.

Involves Small Amount:

Instead of getting burdensome by making a lump sum amount for investing in mutual funds all at one go, SIP enables investment of smaller amounts at regular intervals which may be monthly, quarterly or even yearly. This infuses a recurrent savings habit in the investor. So you need not worry to put a huge bulk of money all at once, rather you can opt for the SIPs and make small investments to create a huge wealth. This would further assist in tackling the volatility of market to gain substantial income.

Power of Compounding:

Another reason that makes investing via SIP worthwhile is the compound interest offered by the same. With this, one earns ‘interest on interest’ which enables one to generate wholesome returns in the future. The wealth is accumulated in a way which leads to a financially sound future and accomplishment of investing goals. Earlier the investment in SIP, larger the creation of wealth. Moreover, it is not affected by the fluctuating market and helps in creating a huge wealth in the longer span of time.

The current scenario has almost taken away our breath, and we all are looking for better alternatives to putting our money to beat the market volatility. SIPs can be the best source if we opt for them in an effective manner. So, do not waste your time in finding out alternatives, but start an SIP to grab the best opportunity of the current market scenario.

We, at MySIPonline, have the best solutions for your investment needs that would be helpful in getting greater returns and making better SIPs irrespective of the current volatile market. You must get associated with us to take the benefit of most of them.