Hey guys, I am testing a custom strategy of buying the dip in mutual funds.
Whenever NAV is reducing by 1.5-2%, I’m placing an order on that day.
This is other than normal SIP on first trading day of every month. That is done irrespective of NAV.
I tested this for 10 years of NAV in HDFC mid cap, and some other long running mutual funds.
However, the (buy the dip + normal SIP) strategy is fetching lower or same XIRR than the strategy with only a normal SIP.
I’m not understanding the math behind this strategy getting a lower XIRR. Since everything is at time high now. if I have kept buying at dips for past 10 years, I should be making extra returns since it’s at an all time high and has never gone below the NAV I bought at.
Should I not be having a better XIRR than just normal SIP since I have extra units at lower NAV?
It’s been a while since I looked at this. But if I remember correctly, it’s very hard to beat a regular SIP. Also, even buying the DIP+regular SIP vs. regular SIP results in only marginal differences. The results are also sensitive to starting periods.
Yes true, even I’ve read the same. I was trying to add something to a regular sip, not trying to replace it.
Yeah I guess the problem here is over 10 years, XIRR is not changing by much due to so many investments. The difference is more significant for 3 year periods. The corpus is larger due to more investments too.
In my view, getting too fancy with SIPs rarely pays off. Most of your returns come from increasing your savings rate, than anything else. So, personally, none of these timing strategies made much sense to me.
