AMFI data suggests that of the total mutual fund assets held by individual investors in equity-oriented schemes, on average, 48 percent is redeemed within two years. This appears to run contrary to the narrative of increased SIP inflows.
There are a few reasons why people withdraw from mutual fund SIPs so soon:
- Lack of knowledge and understanding: Many people start SIPs without fully understanding how they work, or the risks involved. When they see short-term volatility in the market, they may panic and withdraw their money.
- Unrealistic expectations: Some people start SIPs expecting to get rich quick. When they don’t see immediate returns, they get disappointed and withdraw their money.
- Financial emergencies: Sometimes, people may have to withdraw from their SIPs due to unexpected financial emergencies.
- Change in financial goals: If a person’s financial goals change, they may decide to withdraw from their SIP and invest in other assets.
- Market volatility: When the stock market experiences a downturn, some people may get nervous and withdraw their money from their SIPs.
It is important to remember that SIPs are a long-term investment strategy. The best way to benefit from SIPs is to stay invested for the long term, even when the market is volatile
Here are some tips to avoid withdrawing from SIPs too soon:
- Do your research: Before you start a SIP, make sure you understand how it works, the risks involved, and the time horizon required to achieve your financial goals.
- Set realistic expectations: Don’t expect to get rich quick with SIPs. It is a long-term investment strategy that requires patience and discipline.
- Create a financial plan: This will help you understand your financial goals and how to achieve them. It will also help you stay on track with your SIPs, even during market downturns.
- Have an emergency fund: This will help you meet unexpected financial needs without having to withdraw from your SIPs.
- Review your portfolio regularly: This will help you ensure that your SIPs are aligned with your financial goals and risk appetite.
If you are considering withdrawing from your SIP, it is important to talk to a financial advisor first. They can help you understand your options and make the best decision for your individual situation.