Whenever there is fear or volatility in the markets, many investors
pause or stop SIP due to fear taking over rational thinking. They fear market
could fall further and they may suffer more losses. However, they must realise
that volatility and temporary fall in value is what they signed up for when
they got into equity as an investment vehicle.
Allowing emotions to take over has serious cost to long term wealth creation and overall returns suffer. When at the very time we are supposed to increase our SIP to take advantage of discount sale, our human biases of loss aversion will make us blind towards rational view. (see table) The growth rate of uninterrupted SIPs continues to deliver better results compared to the ones that are paused and restarted. Besides, it also helps to be on track from a goal-based investment perspective.
the Original chart appeared here in this article of livemint
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