mutual funds
You can save tax upto Rs. 46,350 per year by investing in ELSS funds.Flickr

Systematic Investment Plan (SIP) has always been considered as the safest way of investing in the stock market, especially for the new investors. In recent years, India's love for investing in the equity funds has been increasing. However, the last two years have been tough for the equity mutual fund schemes.

A report by NJ Wealth shows that in the past two years, out of total 137 equity mutual fund schemes 78 were in red with an average loss of 1.5 percent. Interestingly, mid/small cap funds have witnessed a loss of 6 percent but in contrast, large-cap funds have gained 1.5 percent in the last two years. However, for the longer tenure, like three and five years, they have gained 5.21 percent and 10.28 percent, respectively.

The Economic Times has reported that although most of the investors, especially the long-term investors, are not concerned due to this short term volatility, the ones who came after seeing the high returns of 2016 and 2017 are now feeling worried about these investments turning red. The stock market has been witnessing a huge inflow of money into equity mutual funds through the SIP route. Remarkably, investors infused Rs 8,022 crore in December 2018 through SIP, which is four times the Rs 1,916 crore investment in March 2015.

Swarup Mohanty, CEO of Mirae Asset Mutual Fund, says:  "Investors should continue with their SIPs and not worry as downturns help accumulate a higher number of units. This will help create wealth when the market cycle turns upward."

Bombay Stock Exchange (BSE)
The Bombay Stock Exchange (BSE) building is illuminated during the Diwali special trading session celebrating the annual Hindu festival of lights in Mumbai November 3, 2013.Reuters

The distributors highlighted that the investments made under equity class are prone to volatility and do not give linear returns like a fixed deposit. They further added that generally SIP is preferred by the individuals who have long-term plans like children's education, buying a house, or planning for retirement.

"Equity returns are not a consistent year on year. If you have done an SIP to meet a goal with a timeframe of five-seven years, you should not worry about low returns over a two-year period," says Radhika Gupta, CEO of Edelweiss Mutual Fund. Apparently, SIP is becoming hugely popular among the Indian Mutual funds investor because of two major reasons including the disciplined investment and rupee cost averaging.