Investors should avoid abandoning their systematic investment plans (SIPs) after two years of flat market returns, as history suggests that patience has often been rewarded, according to Abhishek Tiwari, CEO of PGIM India Mutual Fund.
Tiwari said the fund house’s analysis shows that investors who remained invested through prolonged sideways markets typically earned strong returns over the following two years. While he cautioned that markets do not follow a fixed pattern, he said the odds continue to favour disciplined investing rather than trying to time the market.
“Our study found that if you have stayed put for two years or more in times that markets have stayed flatish, the average return that an investor could have generated is northwards of 20% for a two-year holding period beyond the flat period,” Tiwari said. He added that this outcome occurred 93% of the times, while noting that it is not 100% of the time.
His comments come at a time when SIP inflows continue to touch record highs despite muted market returns. According to Tiwari, the industry deserves credit for investors’ discipline.
“I think we must congratulate the investor community,” he said, pointing to record SIP inflows of ₹32,297 crore and 66 consecutive months of net equity inflows, even as the Nifty 500 TRI has delivered only around 0.3% returns over the past two years.
Tiwari said investors often misinterpret SIP stoppage data by comparing it directly with monthly inflows.
“There is new SIP entering into the system. There are also SIPs which are naturally getting closed… and SIPs which are getting terminated by choice,” he explained, adding that these are different data streams and should not be viewed in isolation.
Avoid chasing recent winners
According to Tiwari, one of the biggest mistakes investors make during prolonged flat markets is chasing funds that have recently delivered the highest returns.
He said PGIM India’s study found that among the top 10 performing funds in 2014, nine failed to maintain their rankings two years later, highlighting the risks of performance chasing.
“The return chasing behaviour of looking at rankings, ratings, and trying to jump into a fund… most probably happens after the best part of the performance uptick has come by,” he said.
Instead of reacting to recent returns, investors should revisit the original reasons for investing and check whether the fund continues to meet their financial goals and asset allocation strategy.
“We always go back to the thesis and ask ourselves why did we buy it… Is the mandate of the fund remaining intact?” he said.
Stay invested, but review your investment thesis
While Tiwari believes patient investors are more likely to benefit when markets recover, he said investors should continue reviewing their portfolios rather than blindly holding investments.
“I don’t think just two years of flatish markets… should stop you… to reevaluate your investment thesis,” he said.
For investors considering exiting equity markets after a prolonged period of muted returns, his advice was straightforward.
“People who are invested should remain invested for the probability of winning to be in their favour,” Tiwari said.
For the full interview, watch the accompanying video
Flat markets have rewarded patient investors 93% of the time, says PGIM India MF CEO
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Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Readers should consult certified experts before making any investment decisions.