Frontpage Insights: One of the best ways to overcome the challenge is to invest through SIP – Ajit Menon

From modest beginnings in 1986, the journey of the Indian market has been truly amazing. The Sensex took more than two decades to reach the 10,000 mark in 2006 and doubled in 2007. In December 2007, the S&P BSE Sensex crossed the 20,000 mark. While investors were celebrating this achievement, the celebration was interrupted. The vortex of the global financial meltdown rocked the entire world and the Sensex crashed 61 percent during the period 2008-10. Maximum drawdown is a measure of the fall in value of an investment from its highest high to its lowest in a given period of time. It shows that if you had bought at the highest highs and sold at the lowest lows, you would have suffered such a huge loss,” said Ajit Menon, CEO, PGIM India Mutual Fund.

Looked at data from January 2006 to September 2024 and looked at the impact of holding investments for the entire period versus the best days missed in the Sensex. One of the best ways to overcome this behavioral challenge is to invest through a Systematic Investment Plan (SIP) so that you don't miss out on those good days. For most investors this step-by-step approach to investing provides the equations for taking advantage of a market opportunity.

Sustained domestic inflows in the recent past have shortened the days to recovery from drawdowns and investors are waiting for sideline risks that have been missed in this rally. Market movements are difficult to predict but in retrospect it is fair to assume that investing during downturns or market corrections can yield reasonable returns for investors who have the patience and conviction to ride out this volatility. Thus, survival is the best approach.

Investors should make decisions based on these factors Following a goal-oriented investing approach keeps you focused on the investment journey, no matter what the market is doing. If your current asset allocation has deviated from its original target, it may be appropriate to shift the exposure back to your desired asset allocation. Another time to realign the portfolio is when you are close to the target. Consider getting closer to the target.

This is the right time The best time to invest in tree planting was 20 years ago. The second best time is now”, goes the old saying. If you have never invested in equities and are waiting for an opportunity to enter when the markets fall, you will be waiting forever. Imitate instead of thinking about when to start.