Direct equity investing may feel addictively rewarding for those who can find time but value investor D. Muthukrishnan believes that investing in a Systematic Investment Plan (SIP) over a long period could be very beneficial too.
What Happened? Muthukrishnan is of the opinion that people who don’t want to learn a “hundred different things about macros, micros, and markets” can go the SIP route but need to be disciplined towards not breaking instalments.
“Do SIP (dollar-cost averaging) every month without breaking even one instalment for the next 20 years,” says the certified financial planner (CFP). “Choose an index or a few diversified equity funds. You’ll really do very well,” he adds.
Fellow value investor Safir Anand also took to Twitter on Friday to let his followers know that stopping SIPs at this stage “is doing the most illogical thing.”
“SIP should always continue to make an impact. I continue to SIP into my stocks every month,” stated the IP investor.
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According to data from the Association of Mutual Funds in India (AMFI) the SIP stoppage ratio shot to a 27-month high of 0.68 in February 2023 compared with the long-term average of 0.51.
The reason this ratio is worth noting is that ‘SIP stoppage ratio’ essentially relates the number of closed accounts under the SIP of mutual fund houses to new account openings. The metric shows that investors are turning cautious amid reducing equity returns over the past 12 months.
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