Should You Pause Your SIPs Before the 2024 General Elections?

Investors often get uneasy with market uncertainties, especially during crucial events like elections. With the recent victories for the Bharatiya Janata Party (BJP) in key states, the stock market has seen a positive trend. However, some investors might be contemplating whether to pause or continue their investments until the general elections in April-May 2024. Let’s analyze whether it makes sense to halt your Systematic Investment Plans (SIPs) based on historical data.

Past Election Trends:

Looking at data from the past five election years starting in 1999, the analysis reveals that investors who started their investments six months before the election results generally made more money compared to those who waited for the outcome. Trying to time the market in election years didn’t necessarily result in losses, but it led to comparatively lower returns.

One-Year Investment Scenario:

For instance, in the 2019 elections, investors who initiated a lump sum investment in Nifty 50 index six months before the results made a 13% return over one year. In contrast, those who waited until the election results day incurred losses over the same one-year period. This trend was consistent in the election years of 1999, 2004, 2009, and 2014.

SIP Analysis:

Examining SIP returns from the ten largest actively-managed diversified equity schemes, it was observed that starting a SIP six months before election results generally yielded better returns for one-year periods. While a three-year SIP started on election results day in 2014 performed better than a SIP initiated six months before, the long-term data indicates that attempting to time the market doesn’t produce desired results.

Expert Opinions:

Financial experts unanimously advise against trying to time the market based on election predictions. Suresh Sadagopan, a SEBI-registered Investment Adviser, emphasizes the futility of such attempts and encourages investors to stick to their long-term investment plans. Amol Joshi, Founder of PlanRupee Investment Services, supports this view, emphasizing that mathematically, pausing SIPs due to election uncertainties cannot be justified.

In conclusion, the consensus among experts is clear: investors should stay the course, continue their SIPs, and avoid making decisions based on short-term predictions related to elections.