Uncertain times need clarity of vision and thought. Dealing with the crisis needs objective thinking and clarity of purpose as against anxiety, confusion and haste. In the world of investing, every few years we pass through times when all looks doomed, markets take deep correction, volatility rules and confusion prevail around future outlook. Such are times which savvy investors look at opportunity for making disproportionate return.

Such uncertain times impacts retail investors most; lack of experience, limited availability of funds, falling returns take a deep toll and the first reaction often is one of dismay, lack of faith and confusion. Engaging with experts and seeking guidance are right actions one can take.

Market having taken a sharp correction, and future outlook being unclear even after of some pull back and associated volatility is causing similar emotions. A lot of people who subscribed to SIPs are struggling with these thoughts every day and asking themselves and their financial advisors for next steps.

What is best to do in such times is the question, simple, take a deep breath and go back to basics and before taking any action, which is:

  1. Look at history to draw lesson from past – when future is uncertain, its always good to draw upon the history.
  2. And second, review objective – ask yourself as to why did I, at the first place set out to start this journey?

Before I dig into above two, I would like you to take to a more fundamental question, what’s SIP and what is its value proposition?

  1. A systematic investment plan involves investing a consistent sum of money regularly, and usually into the same security instrument to build future wealth in a dynamic investment environment.
  2. SIPs operate on the principle of rupee-cost averaging to create sizable wealth.

And the value proposition is – it averages out the cost of acquisition, purchasing new units at a higher price in a rising market and at lower price in a falling market. Unit additions during market lows give higher return as markets turn and starts to go back up. History has it that markets are not omnidirectional, sometimes moving up and others going down, but overall trend in market si always one of up move because of ever increasing size of global economy, increasing revenues and profitability.

Above is a fact that held good in the past and continues to hold good for future. What does this mean, any dip, for whatever reason, is a buying opportunity to take benefit of lower cost and thus higher future return. As long as Dip is because of external reasons and not specific to an investment instrument.

Now quickly going back to our point above regarding history. There have been three major bear markets over last there decades, 1992, 2000 and 2008 where benchmarks corrected over 40% to 50% from its respective highs. Now look at one year forward returns post these bear phases, markets generated disproportionate returns. Those who took advantage of these dips, and continued to invest, generated sizable returns. Going by history current market fall offers similar opportunity, and therefore unambiguous advice would be to Continue investments (SIP) and get ready for significant returns over next 12 to 24 months as things get better and clarity emerges.