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Should you stop your SIPs now that the market has reached an all-time high?

Posted on 16 Jul 2023
Author: Sayan Sircar

Tags: Market Movements

6 mins read
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The article shows you what has happened in the past when the stock market hit an all-time high and what the investor should do next.

Should you stop your SIPs now that the market has reached an all-time high?

This article is a part of our detailed article series on what to do when stock markets reach a lifetime high. Ensure you have read the other parts here:

How to invest a lump sum amount when the stock market is at an all-time high?

This article shows how an investor should invest a lump sum amount in the stock market when the market has reached an all time high.

Nifty above 21000: 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?

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.

The stock market has reached an all-time high. Should you buy or sell?

This article shows a way to decide what to do when stock markets reach all-time or lifetime highs. Should investors buy more or sell to book profits?

📚 Topics covered:

Another new stock market high
Why would you think of stopping your investments?
What if the market falls soon?
What if the market does not rise as fast as it just did
What should investors do then after a market all-time high?
What returns to expect for SIPs started after a market high is reached?

Another new stock market high

Nifty 50 reaches Lifetime high level on 14-Jul-2023

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

Hearing this news, many new investors are considering stopping their monthly SIPs, wondering what the stock market will do next.

Why would you think of stopping your investments?

Two things might be going on your mind when you see that the stock market has reached a new peak:

what if the market falls soon
what if the market does not rise as fast as it just did

We will answer both these questions one by one.

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What if the market falls soon?

Here we have looked at average short-term (3-month and 6-month) returns in the Nifty 50 just after the ATH. The results are shown below.

Short-term Return from All-time-high

The short-term returns are decent if you look at the average over the entire period. As shown below, the situation significantly improves in the longer term.

Average short-term return after All-time-high

Also read
Sovereign Gold Bond (SGB): complete issue price history in India

What if the market does not rise as fast as it just did

Here we have looked at average long-term (1-year, 2-year, 5-year and 10-year) returns in the Nifty 50 just after the ATH. The results are shown below.

Return from All-time-high vs. Nifty 50

The average returns are also quite reasonable in the longer term.

Average return after All-time-high

What should investors do then after a market all-time high?

Average return any time

We now present the average returns for short and long-term holding periods. We see a substantial gap in the average returns for holding periods from 2 years onwards.

Here it is essential to consider how much is the current SIP amount relative to the corpus already accumulated since each of these returns is for a single investment immediately after the market reaches an all-time high.

If you have a ₹10L corpus and a ₹20,000/month SIP, then pausing the SIP for 1-2 periods may have some benefit. However, suppose your corpus is ₹1cr, and you have a ₹1L/month SIP. In that case, the impact of stopping the SIP and later restarting will be less on an overall portfolio basis. You might as well let the investments continue since you do not know when the markets will fall.

What returns to expect for SIPs started after a market high is reached?

We have covered this topic in detail here: Nifty above 20000: what should you do with your equity SIPs? Start, stop or continue?

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