Arthgyaan

Supporting everyone's personal finance journey

Nifty above 20000: what should you do with your equity SIPs? Start, stop or continue?

As the market keeps rising to new all-time high figures, how much returns should equity investors expect from their investments running in SIP form.

Nifty above 20000: what should you do with your equity SIPs? Start, stop or continue?


Posted on 17 Sep 2023
Author: Sayan Sircar
5 mins read
Get new post notifications on WhatsApp!

As the market keeps rising to new all-time high figures, how much returns should equity investors expect from their investments running in SIP form.

Nifty above 20000: what should you do with your equity SIPs? Start, stop or continue?

šŸ“š Topics covered:

Another new stock market high

Nifty 50 reaches Lifetime high level on 15-Sep-2023

We first wrote about the Nifty 50 reaching an all-time high (ATH) of 18,484.1 on 24-Nov-2022 and then again when the Nifty 50 crossed 19500+ on 14-Jul-2023. Since then, the index has reached ATH levels 8 times, with the latest peak on 15-Sep-2023.

Investors, both new and old, wonder what should they do with their equity investments running in SIP form: start, continue or stop? At this point, investors should quickly review the definition of SIP, SWPP and STP before continuing:

SIP SWP and STP

All of these are standing instructions that get executed as per a schedule you specify:

  • Systematic Investment Plan (SIP): Money from a bank account is invested into a mutual fund, typically once a month
  • Systematic Transfer Plan (SIP): Units from a mutual fund are redeemed to invest in another mutual fund of the same AMC
  • Systematic Withdrawal Plan (SWP): This is the reverse of the SIP. You sell the units from a mutual fund to send money to a bank account
Recent articles:
1 / 3
<p>A quick retirement calculation for a reader query who has a good amount of corpus already saved for retirement.</p>
2 / 3
<p>This article explains the PFRDA announcement about a new default scheme under NPS Tier II for government employee subscribers.</p>
3 / 3
<p>As per SEBI rules, mutual fund investors must have nominees in their folios by 1st October 2023 or explicitly opt out. Otherwise they will face restrictions in selling units.</p>

Join the Arthgyaan WhatsApp community: You can stay updated on our latest content and learn about our webinars. Our community is fully private so that no one, other than the admin, can see your name or number. Also, we will not spam you.

SIP returns exactly at the ATH levels are slightly lower

As expected intuitively, SIP returns for both short and long-term SIPs (₹1000/month in Nifty 50 price index) started at the time of all-time high is slightly lower than other periods as the charts below show:

Short-term SIP returns at All-time-high and otherwise

Long-term SIP returns at All-time-high and otherwise

Apart from the 20-year SIP case, all the others have slightly higher returns when the SIP series starts on an ATH dates vs. when it does not.

Should we then wait, skip or stop our equity SIP?

To answer this question, let us review the Nifty 50 price index since 1993. Over this period, there have been almost 500 days where the index has hit an all-time high.

Nifty 50 All-time-highs

There is unfortunately no shortcuts here in case you are expecting a simple go, halt or skip answer. Investment, like many other things in life, is simple once you understand it but not easy. Therefore, we will follow a systematic approach here via a series of questions:

Have you identified your investment goals?

Alice in Wonderland teaches us why goal-setting is important

Goal setting helps you understand the priorities of your life, set the future of you and your family, understand the various money-related challenges that come and be best prepared for the future financially. Goals give direction and momentum to your financial life:

  • direction: if you know why you need it then you know what to invest for. Creating wealth is not a goal. But investing for the purpose of sending your child to Harvard in 15 years is a goal
  • momentum: this allows you to build investing discipline and track progress along the compounding journey. Without a goal, it is likely that the money will be spent on frivolous things just because ā€œmoney is availableā€.

You will hurt your chances of creating wealth via compounding if goals are not set.

You can follow the complete investment goal-setting framework as well as these worked out examples of S.M.A.R.T goals.

Do you have an asset allocation plan for each of these goals?

The basic premise of asset allocation is a balance of the investor’s goal priority (needs vs wants) and the time horizon of the goal like this:

(click to open in a new tab)
Goal-based investing: priority vs. asset-allocation

Once that is determined, a split of risky and risk-free assets like equity, debt, gold, cash etc per goal can be determined.

You can read more on Asset allocation here: What should be the Asset Allocation for your goals?.

Have you hit your rebalancing corridors?

What is rebalancing

Rebalancing is a risk-management tool that allows you to systematically buy low and sell high.

We will use corridor-based rebalancing as the decision-making framework here. We will use 5% as a corridor and a target asset allocation between two asset classes equity and debt. We will rebalance if the market movement shows that the current allocation has deviated by 5% from the target. If you are unaware of the concept of rebalancing, then please review this article before proceeding: Portfolio rebalancing during goal-based investing: why, when and how?

Corridor-based rebalancing is explained in detail here: The stock market has reached an all-time high. Should you buy or sell?

Once you have completed this framework, the next steps regarding your equity SIP will be clear. To help you, we have a list of extensive case-studies that you may refer below.

What's next? You can join the Arthgyaan WhatsApp community

You can stay updated on our latest content and learn about our webinars. Our community is fully private so that no one, other than the admin, can see your name or number. Also, we will not spam you.

If you liked this article, please leave us a rating

The following button will take you to Trustpilot:

Discover an article from the archives

Worked out case studies for goal-based investing

Previous and next articles:

<p>Expert tips for maximizing your tax refund so that you can do the best thing to do for your portfolio in India.</p>
Tax
Maximizing Your Finances: Smart Moves for Your Tax Refund Windfall in India

Expert tips for maximizing your tax refund so that you can do the best thing to do for your portfolio in India.

Published: 13 September 2023

5 MIN READ


<p>NRIs need to follow FEMA rules once their tax residency status changes from resident Indian to NRI. This article shows how to calculate the residency status based on the amount of time spent inside and outside India.</p>
NRI
Who is an NRI and who is not? Understanding FEMA and NRE/NRO bank accounts

NRIs need to follow FEMA rules once their tax residency status changes from resident Indian to NRI. This article shows how to calculate the residency status based on the amount of time spent inside and outside India.

Published: 20 September 2023

3 MIN READ


Latest articles:

<p>This article shows a handy ready reckoner for home loan EMI amounts for all tenures and interest rates along with the amount of principal and interest to be paid.</p>
House Purchase
How much EMI do I have to pay for my home loan?

This article shows a handy ready reckoner for home loan EMI amounts for all tenures and interest rates along with the amount of principal and interest to be paid.

Published: 29 September 2023

1 MIN READ


<p>A quick retirement calculation for a reader query who has a good amount of corpus already saved for retirement.</p>
Retirement Reader Questions
How much money does this 39 year old investor need to invest per month to retire at 58?

A quick retirement calculation for a reader query who has a good amount of corpus already saved for retirement.

Published: 27 September 2023

7 MIN READ


Topics you will like:

Asset Allocation (20) Basics (8) Behaviour (10) Budgeting (11) Calculator (17) Case Study (6) Children (12) Choosing Investments (38) FAQ (6) FIRE (13) Gold (11) Health Insurance (4) House Purchase (17) Insurance (15) International Investing (10) Life Stages (2) Loans (9) Market Movements (13) Mutual Funds (29) NPS (6) NRI (13) News (9) Pension (8) Portfolio Construction (46) Portfolio Review (27) Reader Questions (6) Real Estate (6) Retirement (36) Review (12) Risk (6) Safe Withdrawal Rate (5) Set Goals (27) Step by step (14) Tax (37)

Next steps:

1. Email me with any questions.

2. Use our goal-based investing template to prepare a financial plan for yourself
OR
use this quick and fast online calculator to find out the SIP amount and asset allocation for your goals.

Don't forget to share this article on WhatsApp or Twitter or post this to Facebook.

Discuss this post with us via Facebook or get regular bite-sized updates on Twitter.

More posts...

Disclaimer: Content on this site is for educational purpose only and is not financial advice. Nothing on this site should be construed as an offer or recommendation to buy/sell any financial product or service. Please consult a registered investment advisor before making any investments.

This post titled Nifty above 20000: what should you do with your equity SIPs? Start, stop or continue? first appeared on 17 Sep 2023 at https://arthgyaan.com


We are currently at 299 posts and growing fast. Search this site:
Copyright Ā© 2021-2023 Arthgyaan.com. All rights reserved.