SIP myths debunked: When investors should step up, pause, or stop them
Published by Business Standard
Abhishek Kumar's role: Quoted
Abhishek Kumar said investors can step up SIPs at any time if it stays in line with their risk-based asset allocation, and cautioned against over-committing. He suggested pausing equity SIPs once the desired equity share is reached, but not during market downturns.
What Abhishek Kumar said
When is the right time to step up my SIP?
In my view, you can step up your SIP at any time, as long as the increase stays in line with an asset allocation that is based on your risk appetite. The market level does not have to decide it. What I caution against is over-stepping: committing more to SIPs than your finances can comfortably carry can strain your monthly budget and make it hard to keep going.
When does it make sense to pause an equity SIP?
One sensible reason to pause is your asset allocation. Once your equity holdings have reached the share you want in your portfolio, I suggest pausing the equity SIPs and directing your fresh money into debt instruments instead. That way the new savings bring the portfolio back towards the allocation you planned, rather than adding even more to equity than your risk profile calls for.
Should I pause my SIP when the market is falling?
I would not pause SIPs during a market downturn. Stopping at such a time can damage the financial discipline that makes an SIP work in the first place, and it can make you miss the chance to buy fund units at lower prices. Keeping the SIP running through the fall lets you keep buying at those lower prices.
In our words, from what he said in the piece. General information, not personal advice.
More of Abhishek's views on mutual funds
The article looks at when investors should increase, pause or stop their SIPs, drawing on industry data on the growth of SIP accounts and contributions. It covers step-up SIPs linked to income growth, reasons to pause such as emergencies or asset allocation, when stopping makes sense, and common myths about SIPs.
Publisher source
SIP myths debunked: When investors should step up, pause, or stop them