Is SIP really a good mode of investment???
Should I really continue with my SIPs???
Would I not be better-off investing in RDs/PFs/Gold???
Should I increase my monthly SIP investments???
Such thoughts could have crossed the minds of most people who have either a SIP running or are considering to invest monthly.
I made a study on the return (% Annualized) of a SIP investment in an equity Mutual Fund (which is not amongst the top 25 equity MFs in terms of past performance). Have considered an investment period from April 2007 to June 2012. The below graph shows you how the returns from the Systematic Investment have fared in the period under consideration.
pril 2007 to Feb 2008: Part of Bull Market (rising markets)
Feb 2008 to April 2009: Bear market (falling markets) period
May 2008 to June 2012: Volatile and range bound market
Lessons from the above graph:
a) SIP is a good method to invest in equity as it reduces our risk by lowering our cost of investments during periods of bear market.
c) Bear market is the best period to invest / Should never STOP an SIP in bad phases of market.
d) Periods of Negative returns will be followed by periods of positive returns
e) Period of Bull markets when the returns go > 25% are great times to book profits and even completely exit equity markets.
f) The stock market will always be Volatile, volatility is the investors best friend, lets make use of it.
g) Patience pays. (Its not timing the market, but time in the market that will make you Wealthy).
Value Averaging Investment plans and Systematic Transfer Plans (for people with bulks of money to invest) have an edge over SIPs. We at Assuredgain can help you to choose right SIP based on your risk level and profit expectation.