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No bonus, increment this year? Doesn’t mean no SIP

Along with lower annual inflow from your profession, your market linked investment values are perhaps looking lower too. What should you do about your market linked investments now?

The reason we start investing fixed amounts regularly each month in the garb of a systematic investment plan or SIP is to ensure disciplined investing.

Undoubtedly, 2019 has been a difficult year for the economy, industry and businesses. Which means some of us haven’t got increments and bonuses to match the previous years. Along with lower annual inflow from your profession, your market linked investment values are perhaps looking lower too. What should you do about your market linked investments now?

Here are the behaviour basics you can rely on in such uncertain times.

1. Don’t change your monthly investment – While you may have pencilled in a 10%-15% increase in SIP investments each year, if you haven’t got an increment or significant bonus hold it off and continue with what you were investing through last year. Also, don’t lower your monthly SIP commitment because your long-term goal which is getting fuel from your monthly SIP, most likely hasn’t changed. Cut down on expenses if you have to, but consider SIPs as sacred and continue as is. 

2. Don’t switch to safer options – Preserving profit in times of downturn is a natural thought. Should you redeem out of equity funds and stop your equity SIPs, move to debt funds or fixed deposits? If you do that, it will dent the return expectation on your long-term goals for which you started regular investments in equity funds. Make your peace with falling returns and stay put if your goal is still far away. 

If you withdraw, you lose time because you are unlikely to restart in equity investments in a hurry and you have also lost the opportunity for buying stocks (via funds) at lower prices. The expectation of inflation plus returns in equity comes over the long term and if you don’t remain invested throughout that period you will not be able to make your expected return.

3. Cut back on discretionary expenses – If you must, spend less to accommodate your SIP. It doesn’t mean you have to forgo your daily needs and the necessary expenses like fees, medicines and so on. What you should rethink is the large spends like vacations, weekend trips, designer apparel, unlimited toys and night outs. 

Cut back on some of these frills and you will realise you are able to generate that little bit extra every month which lets you continue your daily lifestyle without dipping into your investment pile or pulling back your SIPs. 

If you withdraw, you lose time because you are unlikely to restart in equity investments in a hurry and you have also lost the opportunity for buying stocks (via funds) at lower prices. The expectation of inflation plus returns in equity comes over the long term and if you don’t remain invested throughout that period you will not be able to make your expected return.If you withdraw, you lose time because you are unlikely to restart in equity investments in a hurry and you have also lost the opportunity for buying stocks (via funds) at lower prices. The expectation of inflation plus returns in equity comes over the long term and if you don’t remain invested throughout that period you will not be able to make your expected return.

4. Focus on your job – While your investments can move up and down in value, your value as a professional should be air tight. Its only when you focus on being the best at what you do can you ensure future employability, hence income and a steady increase in your income thanks to your capability.

When the economy is going through turmoil, your income may undergo stress too. A little bit of prudence and focus can help you tide through tough times. Stopping your regular investments or dipping into savings should be an option of last resort. 

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