Patience Pays

Systematic Investment Plan (SIP) has many advantages to the investor. One of the advantages is that it helps investors in rupee cost averaging as investors get more units when NAV is low and vice versa. However, Equity Markets may remain range-bound for a considerable period of time. This may result in negligible or negative returns to the investors. Such scenarios may lead to redemption/discontinuation of the SIP by investors.

However, historical analysis shows another dimension. It was observed that investors who continue the SIPs irrespective of results in the short term benefitted in the long term. A study conducted on historical returns of HDFC Equity Fund (Fund-A) and HDFC Top 100 Fund (Fund-B) has found that whenever 2-year SIP returns are negative, next 3 year returns, as well as total 5-year returns for the SIP, have always been positive*. (Refer table below & next page). In this analysis, we considered past 2 year SIP returns as well as next 3 year SIP returns for every month after inception (total 236 and 210 observations respectively) and whenever last 2 year SIP returns were negative (total 49 and 41 observations and median negative returns of 10.4% and 8.6%), next 3-year median SIP returns where 30.24% and 30.3% and total 5 year median SIP returns where 19.84% and 19.2%.

Share

Share on facebook
Facebook
Share on twitter
Twitter
Share on google
Google+
Share on linkedin
LinkedIn
Share on whatsapp
WhatsApp

most popular blogs

LEAVE A COMMENT
Your Email address will not be published. Required Fields are marked *

Welcome to Maloo Investwise

Disclaimer: This information will help us to contact you. Your personal information will not be shared.

Welcome to Maloo Investwise

Disclaimer: Dear Investor, By clicking on the submit button you will be redirected to our secured website. This link is provided only for the convenience of our visitors. The site has the necessary tools to help you understand your risk profile, asset allocation, and goal calculations. You will also be able to open a folio and transact online in mutual funds.

Welcome to Maloo Investwise

Disclaimer: Dear Investor, By clicking on the submit button you will be redirected to our secured website. This link is provided only for the convenience of our visitors. The site has the necessary tools to help you understand your risk profile, asset allocation, and goal calculations. You will also be able to open a folio and transact online in mutual funds.