Bull Phase or Bear Phase: When Should You Start an SIP?

Stock markets go through cycles, which means that they are Cynical. The Bull and Bear Markets are two of the most significant stock market cycles. A few years may pass once the Bull Phase or Bear Phase begins.

Investors sometimes struggle with deciding whether to start a SIP and whether or not to keep making investments during a specific market period. There are, of course, no simple solutions.

Here, a few fundamental guidelines apply.

First, in the beginning, SIP is all about discipline. So, you cannot enter and exit SIPs abruptly. The majority of SIPs only succeed over the long run. Second, the fundamental tenet is that it is impossible to time market cycles.

In this blog, let us learn if we should invest in a SIP during a Bull Phase or Bear Phase.

Will Your SIP Work Better in A Bull Market or A Bear Market?

• Investing in Bull Phase

A bull phase often occurs when market expectations are upbeat and stock prices are trending upward.

The gains in this phase would have been more significant if you had invested while the market was in a low phase. However, since the future cannot be foretold, no investor can ever time the market. Therefore, much of the market is experiencing a bull run, so it is prudent to maintain your SIP since what currently seems high for you can become even higher if the bull run persists.

You risk missing the chance if you flee. Because you will invest more in equities during a bear phase and less during a bull phase, rebalancing at regular periods, such as once a year, can help you book profits during a bull run.

• Investing in the Bear Run

The stock price is downward, and market expectations are pessimistic during the bear period. Therefore, it is typically better to start SIP when markets and prices are weak. But again, stopping your SIP now is not a wise move.

Averaging the high cost of SIPs acquired in the past or purchased in the future, you will receive more units for your investment. Your subsequent SIP purchases would be made at the levels of the correction after the market began to right itself.

Therefore, if you continue your SIP during a bear market, you may recoup the lost money in the next few years and earn profitable returns as the fund increases. This is precisely how SIPs operate, favoring investors according to the "rupee cost averaging" approach.

• SIP Investment Does Not Call for Market Timing

When the markets are down, it may be tempting to halt a systematic investment plan (SIP).

But SIPs do not need you to time the market! All you need to know is that your SIP will ultimately succeed despite any short-term ups and downs.

You should not let brief downturns like the current situation derail your investing ambitions. It is less probable that one terrible year would ruin your entire plan if your assets are spread out across time and among many investment kinds.

Because of this kind of volatility, frequent SIP investment is so crucial.

• Nobody Regularly Predicts the Ups & Downs Of The Market

It is a common belief in the stock market that if an investor claims to have identified all market bottoms and tops, he must either be God or a liar. A SIP will benefit you considerably more during difficult times!

The solution is to keep investing in your SIP, whether markets are bullish or bearish. You will be better off doing so over an extended period than trying to time market highs and lows.

• Volatility May Be Used to Your Benefit

SIP investors must keep in mind that market volatility is not always a bad thing. Investors purchase high and sell even higher when the markets are rising or in a bull market.

However, when the markets are falling or are otherwise volatile, it can be tempting to panic and liquidate your portfolio, which is the opposite of what you should do. You don't need to be concerned by the market's ups and downs if you invest for the long term.

Investors who maintain their composure might benefit from volatility. Investors with long-term ambitions have time to stock up on mutual fund units when markets are choppy, and prices are declining since they may purchase more units for the same SIP amount.

• Rupee-Cost Averaging

Rupee-Cost averaging occurs when you invest in a SIP, buying equities at both high and low prices.

Over time, your returns increase the longer you keep your investments. Therefore, do not be concerned about imperfect markets if you systematically invest each month.

Bear markets may be advantageous for dependable SIP investors. When the market weakens, the Rupee-Cost Averaging lowers the total acquisition cost (of equities).

This enables you to generate significant profits over the long run. Therefore, understand the idea of Rupee-Cost Averaging and continue investing in your SIP even if a turbulent market may be uncomfortable for you.