3 years: The maximum tenure of almost two-thirds of the SIPs in the country. Even though industry experts and financial advisors keep extolling the benefits of long-term investing, the message doesn't seem to have registered with a large number of retail investors.

Business Standard
10th September

3 years: The maximum tenure of almost two-thirds of the SIPs in the country. Even though industry experts and financial advisors keep extolling the benefits of long-term investing, the message doesn't seem to have registered with a large number of retail investors.

  • According to industry data, 65 per cent of systematic investment plans (SIPs) run for less than three years. Around 47 per cent of SIPs run for less than two years.
  • Investors begin SIPs in equity mutual funds when markets are doing well, but lose faith once they enter a bearish phase. They stop their SIPs and withdraw their money from equity funds.
  • Actually, SIPs tend to do well if one continues to invest when the markets are down. That is when each instalment of the investor's money buys a larger number of units. This helps to improve returns when the markets rebound.
  • Equity assets are also volatile in the short-term. If you have a short investment horizon, you could end up with a loss. Numerous studies have shown that your chances of making a loss reduce as the years go by.
  • Another reason for the low tenure of SIPs is performance chasing. Investors often move out of one fund and enter another when the one they holding is not doing well. Such behaviour usually fails to improve their returns.
  • That's because they leave a fund whose bad times are about to end and good times are about to begin. And they enter one whose hot streak is about to end. So, be very careful while selecting funds and continue your SIP in it for the long- term.

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