Table of Contents
India’s benchmark inflation rate fell marginally in the first few months of 2024. However, the wholesale price index (WPI) increased to a 15-month high of 2.61% in May 2024. The returns of your SIP investments depend on the volatility of the market, especially if you have invested in equity mutual funds. Should you, therefore, change your SIP strategy in 2024, to keep up with rising inflation levels?
A brief overview of how SIPs work
SIPs help you contribute a fixed amount to a mutual fund scheme regularly (mostly on a monthly basis) and help you benefit from rupee-cost averaging. Investing in SIPs helps you purchase more units when the NAV (net asset value) of the fund is low and fewer units when the NAV is high. SIPs also help investors develop investment discipline, which increases their profits.
Factors you must consider before changing your SIP strategy
You must consider a combination of factors before changing your SIP strategy in 2024:
- Assess market volatility before changing your SIP strategy: You can earn high returns only if you are consistent with your SIP mutual fund contributions. Furthermore, you can take advantage of a volatile market to purchase more units at a lower price instead of discontinuing with your SIP investment. Therefore, you must assess market conditions before switching strategies or stopping your mutual fund SIPs.
- Check if your SIP investments are helping you achieve your financial goals: You must note your financial goals before starting any investment. SIP investments that align with your financial goals will yield satisfactory returns in the long run. You must check if your SIP investment is helping you achieve your financial goal(s) before changing your SIP strategy.
- Analyse the performance of your SIP mutual funds and compare them with their expected performances: Another effective way to gauge whether you must change your SIP strategy is analysing the performance of your funds. If the returns almost match with the expected returns, you might not want to change your SIP strategy. However, if the returns are too low, you must consider an alternate strategy.
Adjustments that you can make in your SIP investments in 2024
- Opt for the step-up SIP option: A “step-up SIP” helps you gradually increase your regular Systematic Investment Plan IP contributions. This option also helps you increase your SIPs by a fixed percentage or a fixed amount. Remember that the value of your financial goals, too, is subject to change over time. Opting for a step-up SIP can help you resolve this problem.
- Diversify your SIP investments: You must always look to spread the overall risk of your portfolio across various investments. Diversifying will help you minimise risk and increase your SIP mutual fund returns.
- Realign your investments with your financial objectives: You must conduct a realignment exercise every few months to check if your SIP investments align with your financial objectives. If they don’t align with your objectives, you can adjust them with the objective of realigning them.
In conclusion, you must consider market volatility, your financial objectives, and the past performance of your SIP investments before changing your SIP strategy in 2024.
Read more on KulFiy
Essential Strategies That Every Ecommerce Business Owner Should Know In 2022
Common Data Challenges & Solutions For Businesses