India markets closed
  • BSE SENSEX

    48,832.03
    +28.35 (+0.06%)
     
  • Nifty 50

    14,617.85
    +36.40 (+0.25%)
     
  • USD/INR

    74.4790
    -0.3310 (-0.44%)
     
  • Dow

    34,200.67
    +164.68 (+0.48%)
     
  • Nasdaq

    14,052.34
    +13.58 (+0.10%)
     
  • BTC-INR

    4,307,172.00
    -318,230.50 (-6.88%)
     
  • CMC Crypto 200

    1,398.97
    +7.26 (+0.52%)
     
  • Hang Seng

    28,969.71
    +176.57 (+0.61%)
     
  • Nikkei

    29,683.37
    +40.68 (+0.14%)
     
  • EUR/INR

    89.2728
    -0.3109 (-0.35%)
     
  • GBP/INR

    103.0151
    -0.1211 (-0.12%)
     
  • AED/INR

    20.2330
    -0.0900 (-0.44%)
     
  • INR/JPY

    1.4577
    +0.0070 (+0.48%)
     
  • SGD/INR

    55.8350
    -0.2260 (-0.40%)
     

Can SIPs' yield high returns if you have not actively monitored your investment?

Raktim Sharma
·2-min read

While it may not be a good idea to forget about your long-term SIP investment, traditionally such investments have shown good returns and almost no downside risks. A Systematic Investment Plan (SIP) ideally intends to meet your long-term financial goals. It is a market-linked investment, particularly if it has a higher equity weightage. So, not paying attention to the growth altogether is not recommended.

Studies have shown that the downside risk of a SIP goes away when invested for over eight years. In other words, history has shown that after eight years, your SIP investment is always safe. The question of high returns would, however, depend on a variety of factors. One of them is not to forget about it!

Regular Monitoring

High return on SIP can be ensured through regular monitoring and rebalancing of the fund. If your fund is a chronic under-performer, long-term inaction cannot lead to growth. You have to monitor the performance of the fund and switch to better performing funds if required. This will ensure that your SIP returns to a more positive growth path.

Reallocation of the portfolio should be done in anticipation or as a reaction to changes in interest rates, inflation rates, valuation etc. This is done to minimise the negative impacts of macro-economic changes, or cash in on them.

Rebalancing of your fund resets the portfolio to the desired asset mix. Rebalancing can involve divesting of underperforming assets and investing more in the ones with better growth potential. The dependency on a particular asset class's success or failure decreases, and the portfolio becomes more aligned with your financial goals.

SIP and long-term Growth

SIP is a reliable long-term investment option. It promises to tap economic growth and deliver high returns, and it is possible to achieve the same. However, inaction may not be the best course of action. With some good fortune, a fund can consistently yield a handsome average return in the long-term, without you having to do much meddling with the fund. 

As discussed, through regular monitoring and necessary changes in the underlying assets to the SIP, you can achieve long-term growth on your SIP investment.

Also read: What is intraday trading: all you need to knowA simple 5-step guide to building a effective household budget
Pros and cons of investing internationally
The ideal time to teach your kids about money
Five reasons why home insurance is a must
What is retrospective taxation?

This content is not available due to your privacy preferences.
Update your settings here to see it.