1. Indian equity market has been on a steady upward movement for the last 14 years since 2003-04, with relatively lesser dips in 2008-09, 2011-12 and 2015-16.
2. This has enabled better returns in lumpsum investment than SIPs during this period wherever it has been able to ride this upward curve.
3. However, for most long-term investors, it's risky to invest their hard-earned money in lumpsum as any mistiming may deprive them of benefits for many years.
4. Moreover, if a lump sum amount ends up losing money for an investor, he is bound to shun equity for a long time out of sheer fear, thereby losing out on inflation-beating Investments.
5. Hence, even with an opportunity loss, spreading a lump sum amount over 6-8 months is prudent, because if market dips by 15-20% after a lump sum investment for a few times in his 30-year investment period, a retail investor will look at equity investment very negatively.
6. SIPs are not meant to maximize returns of an investor, but to help average out cost of acquisition over time, and to manage both euphoria and anxiety in a disciplined manner, during market ups and downs, so that he is able to fully devote himself in the primary task of development and growth of his own career during his earning years, as this will eventually enable increasing his investments.
7. Even the best of fund managers haven't timed markets always, so a retail investor won't succeed too, and could end up with disastrous results at the time of retirement, as there are several factors that influence markets (and NAVs) which can't be predicted correctly always.
8. After retirement, withdrawals of 4-6% of corpus annually, either through monthly SWPs or regular redemption, can be made from same funds (or a Hybrid Aggressive fund), as per need and risk profile, while balance corpus grows by power of compounding.
9. A weekly SIP of just 1,000 in a Hybrid Aggressive equity fund, during 30 years of earning life, can provide a weekly SWP of 27,000, during next 30 years of retired life, by remaining invested in the same fund, even without further SIPs, through the power of compounding.
2. This has enabled better returns in lumpsum investment than SIPs during this period wherever it has been able to ride this upward curve.
3. However, for most long-term investors, it's risky to invest their hard-earned money in lumpsum as any mistiming may deprive them of benefits for many years.
4. Moreover, if a lump sum amount ends up losing money for an investor, he is bound to shun equity for a long time out of sheer fear, thereby losing out on inflation-beating Investments.
5. Hence, even with an opportunity loss, spreading a lump sum amount over 6-8 months is prudent, because if market dips by 15-20% after a lump sum investment for a few times in his 30-year investment period, a retail investor will look at equity investment very negatively.
6. SIPs are not meant to maximize returns of an investor, but to help average out cost of acquisition over time, and to manage both euphoria and anxiety in a disciplined manner, during market ups and downs, so that he is able to fully devote himself in the primary task of development and growth of his own career during his earning years, as this will eventually enable increasing his investments.
7. Even the best of fund managers haven't timed markets always, so a retail investor won't succeed too, and could end up with disastrous results at the time of retirement, as there are several factors that influence markets (and NAVs) which can't be predicted correctly always.
8. After retirement, withdrawals of 4-6% of corpus annually, either through monthly SWPs or regular redemption, can be made from same funds (or a Hybrid Aggressive fund), as per need and risk profile, while balance corpus grows by power of compounding.
9. A weekly SIP of just 1,000 in a Hybrid Aggressive equity fund, during 30 years of earning life, can provide a weekly SWP of 27,000, during next 30 years of retired life, by remaining invested in the same fund, even without further SIPs, through the power of compounding.