What is SIP?
SIP or Systematic Investment Plan is an investment module that enables investors to invest a fixed sum regularly, to yield returns. The approach promotes discipline as the investment frequency ranges anywhere between daily, weekly, monthly or quarterly. SIPs are a smart way to make investments in different forms of funds, including crypto. It helps you in getting a grip on your monthly budget and effectively drives returns.
Over the years, SIPs have become a common channel for novice and experienced investors alike. It does demand immense effort and the convenience it offers is noteworthy. So does it make sense to invest in SIP when the market is down? Read on to understand how to plan SIPs during bear market periods in India.
About Bear Markets
A ‘bear market’ is a condition during which the prices of securities decline by nearly over 20% from the latest highs. Investors are discouraged from economic prospects and the overall sentiment in the market is negative.
During bear markets, there is a lack of demand for components that are high in supply. Consumers refrain from making major financial decisions and the cost of commodities continues to fall. Inexperienced investors may find the bear market extremely patchy with much difficulty to trade. However, there are some strategies that you can use to make the best of a bear market.
Additional Read: Top 6 Ways To Beat Inflation In India
5 Ways to Make the Most of a Bear Market
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Keep in Sight Long-term Investment Goals
When the market is inundated by successive lows, the prices of shares are very low. This is a time for investors to make a smoother entry into the market while grabbing a bigger share. Simply put, you can obtain a larger portion of investments that you have been waiting to add to your portfolio. However, the important aspect to note here is that the bear market trend may prevail for extended periods. This is why you must only trade with as much value as you can afford to keep on the market for a longer tenure.
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Do not Lose Sight in bear market
Bear markets invite immense feelings of uncertainty. It is quite common to be worried about future outcomes and make uninformed choices. Do not get emotional and decide to redeem your units. It is important to stay calm and patient.
Whether you choose to make an investment or exit the market, do not be driven by panic. Pausing your investments and undertaking immediate liquidity can lead to unnecessary losses. -
Continue Evaluating your Risk Profile
The idea behind risk profiling is to understand the risk appetite of investors. The risk appetite during the bear-market situation comes with a varied set of variables that must be evaluated. You must reassess your risk profile driven by newer factors such as risk appetite, investment goals, holding liquidity, market fluctuations and returns.
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SIPs – A Good Choice
A bear market may feel like a risky ground to invest in the volatile investment channels. This is where SIPs come in as a great respite. During a bearish trend, you can obtain a higher number of units at a much lower NAV. It is a good time to take advantage of rupee cost averaging and balance out your investment portfolio over time.
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Bear Markets – Crypto SIPs
The crypto market is indeed very volatile, but also offers an opportunity for higher potential gains. Crypto SIPs are a good form of investment channel to use during bear markets. It lets you thread with caution without the pressure to make high-demanding investment decisions. The CoinDCX app offers you the opportunity to safely invest in bitcoin SIPs periodically. A fixed fund is driven toward building the plan and deriving potential returns irrespective of market fluctuation.
The CoinDCX Crypto SIP feature lets you fairly sail through worrisome times by employing Rupee-cost averaging in crypto. For simpler calculation, we will only look at an investment in Bitcoin that began 5 years ago. Let’s say you have been investing a fixed amount of money at regular intervals without ever withdrawing – letting compounding work its magic. In our example, we will consider an investment of ₹1000 every month that has been made for the past 5 years. 5 years equates to 60 months, hence the total investment at the end of the period would be ₹60,000. Now take a look at the table below to show ROIs at the end of the term
Also, for simpler calculation purposes, we will round off the present value of Bitcoin in INR to about ₹18, 00,000.
| INVESTMENT | RETURN | GAIN |
| ₹60,000 | ~₹1,56,000 | 160% |
| BTC PRICE | BITCOIN HOLDING | TOTAL SIPs |
| ~₹18,00,000 | 0.08912 | 60 |
And this is how the execution would look like as against the returns over time. The table and the graph below depict the investment and the returns on a 6-month period for the next 5 years.
| DATE | INVESTMENT | RETURN |
| 08/2017 | 0 | 0 |
| 01/2018 | 6,000 | 10,765 |
| 08/2018 | 12,000 | 12,000 |
| 01/2019 | 18,000 | 10,990 |
| 08/2019 | 24,000 | 38,488 |
| 01/2020 | 30,000 | 42,858 |
| 08/2020 | 36,000 | 53,337 |
| 01/2021 | 42,000 | 2,17,489 |
| 08/2021 | 48,000 | 2,00,041 |
| 01/2022 | 54,000 | 2,71,635 |
| 08/2022 | 60,000 | 1,47,492 |
The chart in brief:
- The light blue line indicates the steady progression of investment
- The dark blue line indicates the nature of returns over the 5-year period, plotted out in intervals of six months, beginning from August 2017 to the end of July 2022.
- The run-up from the beginning of 2020 indicates the returns over the period ever since the outbreak of Covid-19 that resulted in a massive rally in cryptos
- The drop from the beginning of 2022 indicates the bear market that began at the start of this year
If you began investing ₹1000 every month from the August of 2017 till now, even after the bear market with Bitcoin fallen over 70% from its all-time-highs, your total investment of ₹60,000 over the five years would still have been upwards of 160% at ₹1,56,514 as of today. Also, If you look closely at the graph attached above when Bitcoin touched its ATH, your ROIs would have been standing at an astounding 5.5x in the same timeframe.
Additional Read: Diversify Your Crypto Portfolio
To Conclude
Bear markets most often make for a conducive environment to kick-start and maintain your crypto investments. Furthermore, crypto SIPs power you to go through the economic waves without majorly denting your potential returns.
Build on your crypto SIP investment journey with CoinDCX, India’s simplest and safest crypto investment app.
FAQs
Should I continue my SIP in this bear market?
One of the greatest advantages of investing through SIPs is the fact that it allows you to effectively sail through market fluctuations. Irrespective of how well or badly the market is performing, you must continue your SIPs. You do not have to time the highs and lows. The systematic investment plan helps you derive greater potential profits over time as economic growth improves. Withdrawing your SIP is a major mistake as you lose the possibility of returns when the market starts correcting.