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Ventura Wealth Clients
4 min Read
Piramal Enterprises

Our current reality is quite unprecedented and most unimaginable. The pandemic Covid-19 has not only cast a dark shadow over global health but also jobs and livelihoods, economic activity and wealth accumulated over the years. There is so much negativity around us that we forget that this too shall pass. At times like these our approach to investments can also waver. We are so worried about the current value of our SIP investment, showing on the screen, that our emotions drive us to press the stop button.

Yes, there may be a huge gap between the expected return when one starts the SIP and the current value of it, but one should keep in mind that the gap is not necessarily because of the underperformance of the investment fund; it is because of a dangerous micro-organism which has created havoc on the entire planet, spreading uncertainty and gloom.

 Opportunity to lower your average cost: Rupee cost averaging:

 Every investor wants to get the highest return from their investment and in that process, they start timing the market. This is very risky as there is no fool-proof way to time the market.

But SIP can help you get through these uncertain times. When you invest through SIPs, you automatically experience the benefit of rupee cost averaging. Rupee cost averaging means that as you invest in a particular fund periodically (mostly monthly), you accumulate units at various prices (called net asset value or NAV). You get more units when the market is down and the fund's NAV is lower, and you get fewer units when the market is up and the NAV is higher. Over time, as your SIP progresses, you will have invested across all market phases. As a result, your average cost will be reasonable.

 What happens to the market when the crisis gets over?

 Now, the big question that is in the mind of every investor is “when will the market revive?” Frankly speaking, no one knows when the market will bottom out and the revival will begin. But one thing that we can do is examine past data on sharp declines in benchmark indices and the recovery that has followed, one year post the fall.


From the table it is clear that investments made during the decline gave exponential returns once the recovery started. The only thing needed to get such exponential returns after the decline is to remain patient and stay invested during tough times.

What do you miss, if you stop your SIP?

 To answer above question, we have considered 3 scenarios and the results are as follows:

Scenario 1 – If the SIP is discontinued and redeemed after 2 years of investment.


Scenario 2 – If the SIP is discontinued but the amount is not redeemed


Scenario 3 – If the SIP continued till 1st March, 2020


From the above three scenario it is clear that continuation of SIP even during the decline is the key to creating wealth for any investor.

Scenario 1 depicts that discontinuation and redemption of SIP will lead to a permanent loss of capital.

Scenario 2 shows the benefit of not redeeming the investment even after stopping the SIP.

Scenario 3 showcases the wealth an investor would have created in case he had continued the SIP without worrying about the market movements.

We understand that the current scenario is challenging for many investors and there is a possibility that the SIP would have to be reduced/stopped due to the financial strain on the cash flow needs. However, wherever it is possible an investor needs to take a very cautious approach before taking a decision to stop. First try to reduce the SIP amount and then only stop, if necessary.

You may also like to read: Standing out or outstanding: Stock preferences of HDFC Mutual Fund



The products/data mentioned in the document/communication are not exchange traded products and Ventura Securities Ltd. is acting solely as a distributor of the products. All disputes with respect to the distribution activity would not have access to exchange’s investor redressal forum or arbitration mechanism. The recipient acting on this communication shall do so at his / her / its own cost and consequences.

We, Ventura Securities Ltd, (SEBI Registration Number INH000001634) its Analysts & Associates with regard to blog article hereby solemnly declare & disclose that:

We do not have any financial interest of any nature in the company. We do not individually or collectively hold 1% or more of the securities of the company. We do not have any other material conflict of interest in the company. We do not act as a market maker in securities of the company. We do not have any directorships or other material relationships with the company. We do not have any personal interests in the securities of the company. We do not have any past significant relationships with the company such as Investment Banking or other advisory assignments or intermediary relationships. We are not responsible for the risk associated with the investment/disinvestment decision made on the basis of this blog article.



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