Should you continue your mutual fund SIPs during a market correction? Here is what investors should know

Systematic Investment Plans (SIPs) are meant to help investors ride out market volatility, but the prolonged weakness in equities has pushed returns into the red. Here is how investors should approach their mutual fund SIPs, as reported by ET Bureau.

SIPs spread investments across market levels but cannot shield investors from equity market falls. With the Nifty down around 13% from September-end 2024, corrections can push accumulated investments into negative returns if earlier instalments were made at higher valuations. While new SIPs buy more units at lower prices, the benefits may take time to reflect, especially in weak or range-bound markets.

Long-term investors need not stop SIPs just because markets fall, as lower NAVs allow them to accumulate more units and potentially benefit from a recovery. However, increasing SIP contributions should depend on available savings, financial goals, asset allocation and the ability to withstand further market declines or prolonged weak returns.

Negative SIP returns over short periods are not necessarily a reason to stop investing, as market corrections can keep investments made at higher levels in the red. However, investors should distinguish between broader market weakness and fund-specific underperformance by reviewing their scheme’s returns against its benchmark and peers over comparable periods.

No. SIPs can be used across equity, hybrid and other mutual fund categories. While they are popular in equity funds for long-term investing, rupee-cost averaging is more noticeable in volatile markets, where regular investments buy varying numbers of units at different NAVs.