How to deal with SIP in volatile market?

Many of you are already a mutual fund investor and undoubtedly SIP (Systematic Investment Plan) is one of the best ways to accumulate wealth in the long-term and meet your long-term financial goals. However, when the markets get volatile people even with a very disciplined attitude might feel anxious and you see your portfolio catching the downtrend and it may deviate from your desired growth. The first reaction and action become to stop the SIP and withdraw whatever is the accumulated wealth if the volatility stays for a longer period of time.
 
So, is it the right thing to do? To answer this question, we need to first analyze what was your intent behind investing? Was it to time the market and based on short-term tactical moves, earn a profit? or was it to accumulate wealth over a period of time to build wealth for you and your family? Surely to accumulate over a period of time. If building wealth over a period of time is your main intent of investing then you don’t have to worry about the short-term volatility as while the markets are moving all the way down, you purchase more units at low NAV (Net Asset Value). To understand this better let’s look at the table below.

So, if we look at the above table then we can see that your average cost goes on reducing in the falling markets where you buy more units at low NAV. Let’s assume now if you opted to redeem all the units in the last installments then what would be the impact. Here you would receive Rs. 29,245 which is lower than your investment and on the other hand, you may also attract the exit loads, if any. So, as we see stopping and withdrawing the accumulated amount during volatility is not a good idea as you would end up with a loss. However, if you consider continuing the SIP till the planned tenure, then you may end-up create wealth and achieve the financial goal for which you started SIP.