Edelweiss CEO Radhika Gupta has emphasised that systematic investment plans (SIPs) are a long-term commitment, suggesting that patience and time are crucial for success in investing.
Radhika Gupta shared a few insights on SIP investing in a post on X.
Citing data from Edelweiss, she posted, “Since we are all trying to decipher whether to stop, start, time or play the dip, on something as simple as a SIP, some interesting data that may help.”
Here are Radhika Gupta’s tips for SIP investors
- SIP is a marathon: Investing in SIP requires patience just like a marathon, where persistence matters more than speed.
“SIPping is a marathon, and time makes a big difference. Its not about speed (high returns) in marathon (investing) that matters, but persistency that matters more for a fruitful result. Let your SIP compound, and never give up midway through your investing journey. Just like in a marathon,” Radhika Gupta wrote.
- Endurance: Investors must stick to their investments even when the markets fall sharply, as gains can be made once the market bounces back.
“Enduring during tough days and months and collecting those units cheaply makes a big difference to your returns. Endurance during tough market conditions is key to winning the SIP match. Investors who stayed invested when markets fell sharply eventually gained when markets bounced back,” the Edelweiss CEO said.
- Chances of zero returns: The possibility of getting negative returns on investment becomes lower over time.
“Chances of zero returns decrease dramatically with time. When you focus on staying longer on the SIP pitch, chances of getting out (negative returns) are much lower. The investor who stayed invested for 10 years in a SIP match has never been out (earned negative returns),” she wrote.
- Game of chess: Radhika Gupta compared SIPs with a game of chess where each move or instalment leads towards your goal. Hence, investors must not miss out on paying consistent instalments, while impulsive moves must be avoided.
“Skipping those crucial fall instalments hurts. Think stopping a SIP now. In a game of Chess, every right move builds towards your victory. Similarly, each SIP instalment counts and takes you closer to your goals. Especially when markets are down, you get more units.
Making impulsive moves (pausing SIP or trying to time SIP instalments) may lead to unfavourable outcomes,” Radhika Gupta said.
- Focus on your goal: Investors must remain goal-focused by reducing the risk of their corpus once getting closer to the goal to avoid equity market volatility.
“Most importantly, remain goal-focused. The time to get conservative is when you near your goal. Most SIPs are done with a purpose or goal in mind. Hitting the goal is the key purpose of doing a SIP.
One way to ensure this is by reducing the risk of your corpus once you come closer to your goals so that equity market volatility doesn’t impact your corpus,” she added.
- Market conditions: Invest in SIP when the market is low, which will help to recover investments much more quickly.
“Because you buy units at a low, SIP investments often recover more quickly. Enjoy the benefits of ‘Rupee Cost Averaging’ in a BEAR market & ride the BULL market with SIP,” Radhika said.
Additionally, she shared insights on risks associated with challenging times, such as the global financial crisis and the Covid-19 pandemic.
“It’s advisable to maintain a buffer of 1-2 years before the end of your goal. During this buffer period, it is recommended that the SIP corpus be gradually switchedto a debt or hybrid fund. This can ensure that market falls don’t erode your corpus, and you have your targeted corpus to achieve your goal,” Gupta wrote.