Widely read:
How do SIPs work under different market cycles?
The arithmetic of SIP is very simple. In a rising market, or when the market goes up, you get fewer units. When the market falls, you get more units for the same amount of money. And when the market goes nowhere and is static, you keep getting as many units for the money that you are investing.
What are the benefits or potential risks of continuing SIPs during a bull run?
Do your SIP, don't try to mess with it. If at all you have to do something, do something with your asset allocation. That has nothing to do with the state of the market. That has something to do with your time in the market.
If you have invested for a couple of years, you have something sizable. Also, if you are nearing retirement in 2-3 years' time, maybe start gradually putting your money in a more conservative option. If you choose to have 25 per cent of your money in fixed income, then make sure that at least 5 per cent is going into fixed income. That is how you will be able to realign your asset allocation and de-risk yourself from any big market collapse.
Should an investor remain in equity if they aren't nearing a goal?
If you have money that you don't require for 5 years or more, then invest it in equity. Still, I think any portfolio should have some fixed income allocation, whether it is 10 per cent, 15 per cent, or 35 per cent, depending on your comfort level.
But don't think of asset allocation in the first five to 10 years of your accumulation, because you have nothing to lose. This is because you haven't accumulated anything substantial. Once you have a sizable corpus, then think of your asset allocation to protect your wealth. Lastly, be disciplined about it.
Should an investor modify the amount or frequency of their SIP under any circumstance?
Everybody should increase their SIP amount if they get a hike. Do your SIP first before you start spending money.
Viewer's question
What are the best funds to invest in if you have only Rs 20,000 to invest?- Arun
I would urge him to consider a good equity fund. But make sure that you're unlikely to need this money over the next five years. Another suggestion would be to temper his expectations. Also, he should remain disciplined with this Rs 20,000 investment and not get distracted even if the market falls. Stick around for five years and take it as the first lesson in investing and market-linked investments.
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