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I have a profit of nearly Rs 12 lakh, and I have accumulated my corpus through SIPs. I have a long-term view of another 15 years. Shall I withdraw some money and put it into a debt fund?
Let's first discuss the psychology behind such decisions:
- If you sell and the market goes up:
- You might feel that you missed the opportunity to profit more.
- Re-entering the market will become difficult.
- There's a risk that you might end up spending or consuming the money.
- If you sell and the market goes down:
- You might experience a false sense of having perfectly timed the market, especially since the market has been rising for the past 3-4 years.
- You will wait for the market to bottom out, making a re-entry scary.
- Markets are unpredictable and can surprise you when you least expect it.
You've managed to earn this Rs 12 lakh in profit because you have successfully navigated the ups and downs of the market. Consider the weekly returns of the Sensex during particularly volatile periods when the fall was greater than 5 per cent.
| Calendar week ending | Return (%) |
|---|---|
| March 20 | -12.40 |
| March 20 | -9.23 |
| April 20 | -7.44 |
| February 20 | -6.99 |
| February 16 | -6.59 |
| May 20 | -6.16 |
| June 22 | -5.31 |
| January 21 | -5.30 |
| October 18 | -5.11 |
You've withstood these challenging times to achieve your current profit.
If the market highs are creating anxiety, consider adjusting your asset allocation. A solid asset allocation strategy allows you to book profits periodically without stress. However, here are two key points to consider:
1. If you need cash soon: Move some funds to safer, fixed-income options.
2. If you have long-term goals: Continue with your SIPs . While investing at market bottoms can be rewarding, timing the market perfectly is very difficult.
Also read:
SIPs are about psychology, not maths
SIPs are about simplicity
This article was originally published on September 11, 2024.
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