It depends. If your asset allocation is good, you have a good emergency fund capable of seeing you through at least six months of no income in a worst-case scenario, and preferably, you don’t see an impact on your job or sources of earning then the question can be asked in earnest. If you are a believer in India’s growth story, despite this pandemic, then this is a time to continue investing if you have the income to support investments. Those of you who stay invested now will reap the benefits in the future.

History tells us that markets may take years, but they do recover. Our analysis tells us that whenever markets fall more than 20% in a three month period, it has usually been followed by a sharp rise. Only twice has the wait for positive returns been longer than a year. Equity is volatile, no doubt about that. This though is in the short term. If you have selected well-diversified equity funds and your asset allocation is aligned with your needs, you needn’t worry. Equity has had a consistent history of beating inflation over the long run which is about 7-10 years. If you can’t afford to wait that long then equity is perhaps not the asset class for you. But do note that it is the only one that has the chance of beating inflation consistently.

The fall in the value of your mutual fund units due to a market crash enables you to add more units for the same amount of investment when you continue your SIP. In this way, you have more to gain when the recovery begins as you have added units at a faster pace. What this means is that if you stop SIPs now, unless you are facing a crash crunch due to a job loss or pay cut, you are skipping on the recovery. If you are invested in a good equity fund with a consistent history, then continuing your SIPs is much more advantageous. If for some reason you don’t have the finances now, you can pause your SIPs to come back when your income is back on track. Most importantly, do not dip into your equity investments and convert temporary losses into permanent ones.

In times of uncertainty, an emergency fund is your first fortification. If you haven’t properly allocated some liquid investment as an emergency fund which is the equivalent of at least four months’ paycheque then combine your existing short-term debt funds, FDs and liquid funds. Think of the current crisis and market situation as a hard lesson in the value of investing according to your goals and ensuring an asset allocation based on that and your financial situation. The money you invest for the long term should ideally not be needed in, at least, 5 years. Your short-term investments aka your fixed-income based instruments should generally be sufficient to fulfil all your planned short term goals. The time frame for these should be up to 3-5 years. There is also a chance that you might have to increase your savings if growth assumptions change going forward. Keeping your SIPs going for now makes more sense as this will help you even more than simply staying put and not withdrawing unnecessarily.