1. Indian equity market has been on a steady upward movement for the last 38 years, with dips in only 8 years, with Sensex rising from 173 to a whopping 37145 on 11th Sep'19.
2. Even during the last 10 years, Sensex, Midcap Index and Smallcap Index have seen dips in only 12, 13 and 16 quarters out of 40 quarters, which has undoubtedly enabled better returns in lumpsum investment than SIPs by riding this upward curve.
3. However, for a retail MF investor, it's risky to invest his hard-earned money in lumpsum as any mistiming may deprive him of benefits for many years.
4. Also, if a lump sum amount ends up losing a lot of money suddenly, he is bound to ignore equity investment for a long time out of sheer fear, thereby losing out on long-term inflation-beating returns.
5. Hence, although an opportunity loss is evident in SIPs, spreading a lump sum amount over 6-12 months is prudent, because if market dips by 15-20% after any lumpsum investment, even for a few times in his earning years, a retail investor will start looking at equity MFs very negatively.
6. It's true that SIPs are not meant to maximize returns, but to help average out cost of acquisition over time, and to manage both euphoria and anxiety of an investor in a disciplined manner, during market ups and downs.
7. This enables him to fully devote his valuable time and energy in the primary task of developing and growing his own career during his earning years, as this will eventually enable increasing his investments steadily.
8. Even best fund managers fail in "timing" markets, so a retail investor won't succeed too, and could end up with disastrous results at the time of retirement, or when he really needs money for various goals, as there are several factors that influence markets (and NAVs) which can't be predicted correctly always.
9. SIPs of just 5,000 from his monthly income, if invested in a Hybrid Aggressive equity fund, during 30 years of earning life, can comfortably provide him a monthly SWP of 1.5 lakhs, during next 30 years of his retired life, by remaining invested in the same fund, even without any further SIPs, through power of compounding.
2. Even during the last 10 years, Sensex, Midcap Index and Smallcap Index have seen dips in only 12, 13 and 16 quarters out of 40 quarters, which has undoubtedly enabled better returns in lumpsum investment than SIPs by riding this upward curve.
3. However, for a retail MF investor, it's risky to invest his hard-earned money in lumpsum as any mistiming may deprive him of benefits for many years.
4. Also, if a lump sum amount ends up losing a lot of money suddenly, he is bound to ignore equity investment for a long time out of sheer fear, thereby losing out on long-term inflation-beating returns.
5. Hence, although an opportunity loss is evident in SIPs, spreading a lump sum amount over 6-12 months is prudent, because if market dips by 15-20% after any lumpsum investment, even for a few times in his earning years, a retail investor will start looking at equity MFs very negatively.
6. It's true that SIPs are not meant to maximize returns, but to help average out cost of acquisition over time, and to manage both euphoria and anxiety of an investor in a disciplined manner, during market ups and downs.
7. This enables him to fully devote his valuable time and energy in the primary task of developing and growing his own career during his earning years, as this will eventually enable increasing his investments steadily.
8. Even best fund managers fail in "timing" markets, so a retail investor won't succeed too, and could end up with disastrous results at the time of retirement, or when he really needs money for various goals, as there are several factors that influence markets (and NAVs) which can't be predicted correctly always.
9. SIPs of just 5,000 from his monthly income, if invested in a Hybrid Aggressive equity fund, during 30 years of earning life, can comfortably provide him a monthly SWP of 1.5 lakhs, during next 30 years of his retired life, by remaining invested in the same fund, even without any further SIPs, through power of compounding.