Buy low, sell high.
That is the greatest mantra when it comes to investments. However, whenever a market crash occurs, most people tend to throw in the towel. They want to exit the market and retain their capital in order to avoid a loss. This may not be the best approach to investing.
Well, investing in SIPs is a good idea.
Investing in mutual fund through SIPs
The basic principle of investing in Systematic Investment Plans (SIPs) is to avoid market timing. When you invest in a mutual fund through an SIP, you are basically investing a specific sum of money in the fund regardless of whether the market is up or down.
For example, imagine that you are investing Rs 1,000 in a mutual fund each month.
When the value of the fund is high, you can buy a lesser number of units of the fund. But when the fund value is low, you can buy a larger number of units.
The goal of investing in mutual funds through SIPs is to ensure money management and avoid market timing. This way, you can earn steady returns in the long run.
When the market crashes, a lot of investors tend to ditch their SIPs. This can be due to fear of losing money or simply because everyone else is doing so.
But contrary to popular belief, a market crash can actually be a good time to increase your investment in SIPs. In other words, when life gives you lemons, it’s time to make lemonade.
In the case of a market correction, it is possible that the value of your fund decreases to a lower level. At this time, it may be a good idea to increase your SIP investment. This is because, you have the opportunity to buy a larger number of units at a lower price. And when the market rises again, you will be able to earn much better profits.
A market correction may not sound like a very good thing. But when you invest through SIPs, it is actually possible to make more money in the market by increasing your investments. So next time there is a market correction, don’t forget to make the most of the opportunity through your SIP investments.