A Systematic Investment Plan is a great way to ensure that you create wealth over the long-term. It enables you to invest consistently and instills a sense of financial discipline. Your SIP investments also make use of rupee cost averaging to help reduce the overall cost of your investment as well. 

However, what if the market isn’t responding according to your expectations? Do you pause your SIP investments or reshuffle them? And is there a right time to do such a thing? This article will aim to answer these questions in an objective manner. So, let’s begin.  

When is the right time to pause your SIP investments? 

Every Systematic Investment Plan allows you to put a temporary pause on your investments. This pause facility is widely misunderstood and misused by many investors. A large number of investors tend to use this pause facility of SIP investments during volatile and tough market conditions. This, however, is not the right way to go about. 

During tough market conditions, investors should persevere and continue with their SIP investments. Continuing to invest in the market during its lows allows investors to accumulate more units, which can ultimately return good profits in the long-run, when the markets finally turn positive.

That said, the only time you should use the pause facility on an SIP is when you’re short on funds. By putting a temporary pause on your SIP investments, you can buy yourself some time to get your financial situation sorted. And once you’ve got the necessary funds, you can continue on with your SIP.  However, it is important to note that pausing your SIP can have an impact on your long-term returns. This is because you will miss out on the compound interest that would have been earned on your investments. You can use a CAGR calculator to estimate the impact of pausing your SIP on your returns. This will help you to determine whether it is worth pausing your SIP or not.Explore the SIP Calculator for detailed information.

When is the right time to shuffle your SIP investments? 

Another one of the major advantages of a Systematic Investment Plan is that it is extremely flexible. With SIP investments, you can choose to switch the funds that you wish to invest in. For instance, if you’re currently invested in equity funds, you can choose to switch over to debt funds for a while, before returning back to equity once again. 

The perfect time to utilize the option of shuffling SIP investments is during market corrections. As explained above, you can either stay invested in the same fund through the tough market phase, or you can choose to shuffle your investment. 

This way, you would be in a better position to continue to create wealth irrespective of how the market performs. Shuffling SIP investments is a great way to insulate yourself from the financially draining effects of tough market phases. 

Conclusion

With this, hope you’re now aware of when to pause and when to shuffle your SIP investments. Be advised that to start an SIP, a demat account is a mandatory prerequisite. If you don’t have one already, don’t worry. Visit the website of Motilal Oswal right away. You can open a demat account online through a completely paperless process. All it takes is just a few minutes of your time. 

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