SIP News: We always look at SIP i.e. Systematic Investment Plan as a savings. We deduct a small amount every month and invest it for years and then get interest on it, which keeps our future safe. But there is another aspect to it, that is, whenever the stock market falls, this SIP becomes our biggest support. Let us tell you how?

Market decline is a big opportunity
In fact, whenever there is a sharp decline in the stock market, investors get nervous. At that time, everyone sees the value of their mutual fund portfolio decreasing and decides to stop or stop SIP. But this should not be done, because the period of decline in the market is like an opportunity for those investors who invest for a long time.

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The biggest advantage of SIP is that you invest a fixed amount every month, whether the market is up or down. When the market falls, the NAV (net asset value) of the mutual fund also falls. In such a situation, your same SIP amount buys more units than before. That means you get more shares at lower prices. If we understand this in simple language, then during the fall in the market, you are “buying cheap”. Later, when the market improves, these extra units help in increasing your returns.

Why is XIRR important for investors?
Most investors use CAGR to see the performance of their investments, but in SIP, money is invested at different times every month. Therefore XIRR is considered more accurate for SIP. It gives accurate returns keeping in mind the date and amount of each installment.

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understand with example
Suppose two people have done SIP of Rs 10,000 per month at the same time. As soon as the market fell, the investor continued his SIP and the other investor stopped it and started again when the market became normal. So in such a situation, the investor who continued SIP during the fall bought more units at a lower price. After the recovery in the market, his portfolio reached around Rs 2.51 lakh and its XIRR was around 49%.

Whereas the portfolio of the investor who stopped SIP was around Rs 1.46 lakh and his XIRR was limited to around 27%. This means that investors who continue investing when the market falls get more benefits.