Should You Tweak Your SIP Or Invest In Lumpsum To Benefit From The Market Dip?
A lumpsum investment may not be possible for all. If they want to benefit from this correction, then one can top up their investment, said Pankaj Mathpal, founder of Optima Money Managers.
(Source: Envato)
When it comes to benefiting from the market dip, investors need to adopt different strategies based on the investment route that they have chosen. Investors who already have a SIP in place may have to adopt a different strategy from those investing in lumpsum when buying a dip.
India's benchmark stock indices, NSE Nifty 50 and BSE Sensex, closed at their lowest levels in over a month on Monday. The Nifty 50 settled 309.00 points, or 1.27%, lower at 23,995.35. The index fell as much as 2.01% during the day to 23,816.15—a first since Aug. 6.
After the major slip on Monday, investors need to ensure that their goals, method and time horizon are clear.
"Usually what I've seen is, when there is a sharp correction over a short period of time, the recovery is also pretty fast. In cases like this, even if investors tweak their SIPs they won't be able to get the benefit," said Vinit Iyer, principal manager of Prudeno Wealth.
"One can increase their SIP every year to take advantage of good compounding, but in dips like this, SIP may not work like lumpsums," he said.
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Risk And Reallocation
Though the market dip is significant, not every investor has the bandwidth to pull extra funds to buy the dip.
"Theoretically, it's always good to add more units while the markets are down. But practically not everyone can do that, as we are in the middle of the financial year and not everyone has seen increments," said Prableen Bajpai, founder of FinFix.
Amid market volatility, investors need to ensure that their portfolios are rebalanced according to their goals and horizon.
"If one is conservative in their approach, then they can change the allocation within the investing structure. Maybe one can take allocations to mid and small caps as well. Wherever the fall is harder, that is a good place to enter," said Bajpai.
These investment changes need to be executed with funds deployed in an evenly spread manner.
"All this should align to your long term goal. These changes need to be made actively, otherwise the additions can be done incrementally," she said.
Pankaj Mathpal, founder of Optima Money Managers, echoes this view.
"There is a budget everyone has for their income and a lumpsum may not be possible for all. If they want to benefit from this correction, then one can top up their investment," he said.
