Is SIP really a good investment method?

General
1

Hi,
I found this via a WhatsApp forward…pretty interesting and clear examples which cite complete failure of SIP investment technique in bull, bear and neutral market scenarios.

Any thoughts from others who are into SIP-based investments please?

If anyone can provide inputs about their long term SIP investments (like 5, 8, 10, 15 years) and the realistic returns generated, that will really help.

Thanks

2

I am not into SIP because I know it is totally absurd idea.

3

I was trying to get into SIP based investing recently. Heavily advertised during World Cup with “MF Sahi Hai” punch.
This article refutes the theory and claims completely.

Can anyone share their real-life experience of SIP investing over long periods like 5 years or more?

5

Why?

6

The problem with today’s SIP is the marketing around that and the mutual fund industry is guilty of that. A SIP is just a method of investing and it is not a guaranteed road to riches. Now, having said that, it is still the best tool available to a retail investor. Now, is a SIP perfect? Hell now! But for salaried people, and most Indians are, it is the best way to invest given that people won’t have huge amounts of cash lying around.

Now, should you create a SIP and forget? Absolutely not! Plenty of things can go wrong. You might pick a shitty fund, or the next 10 years maybe a prolonged bear market where equities do nothing. This where you asset allocation comes into play. For example, in the last 1-year, a Liquid fund would have given you more returns than smal-cap, mid-cap, or a large-cap fund

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Japan had a bear market for 25 years

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Source: Newfoundland

A SIP wouldn’t have saved you in this case.

Here’s a nicely written article

When you get in and out and you luck are equally important. Unless you know how to time the market successfully, SIP is the best way of investing but it isn’t infallible.

2 Likes
7

How can you really plan for any investment scheme honestly even if she replies somewhat on let’s say 5 or 10 or 15 years other then for example fixed deposit ? And even in that case for such amount of time it’s all really unpredictable, are you with me here ?

8

Yes @PureTopics, appreciate your inputs.

I am seeking some real life examples to check if the real-life scenarios listed in the following can be refuted.

There is no sanity in blindly going for an investment strategy like SIP, without having some concrete details. SIP is a long term committment, and needs years to frutify. Unless I have some evidence, I will not go for it. Rather, I’ll stay away from SIP given the clear examples and scenarios in the above article.

9

I havn’t done SIP in mutual funds but I do it in some large cap stocks and it gives good returns if you keep booking profits at regular interval and re invest the capital.
From my experience, if one does SIP in bear market it will give good returns later on.

10

Looks like the general opinion getting a thumbs-up on this thread matches with that mentioned in the FKnol.com article…to avoid the SIP route, and be more-or-less an active trader with close watch and profit booking at regular intervals. That article rightly justifies avoiding SIP with multiple examples of scenario analysis.

Any other thoughts please?

11

Some of his assumptions are questionable.

  1. He is calculating the return on Investment only of 1 year. Any return on investment in equity/mutual funds need to be looked at from a 5 year perspective at least. One year return is not a measure to check the veracity of a system.
  2. The return he calculated in the first case of 41% is not comparable with his 100% return. He has ignored the time value of money. He is only investing monthly in a SIP and in the former case, he has invested the full value on day 1.
  3. Ideally, the investment in SIP should be discontinued when the returns go beyond 20%. Thereafter the risk reward may not be in favor. Just hold on to the invested amount. It will generate tremendous returns. Or other option is to reduce the SIP amount. This is a unwritten rule of SIP.
  4. I had personally recommended SIPs to friends who invested from 2008 to 2011 and then stopped it. He sold the investments in May 2018 with a CAGR of 28%.
1 Like
12

You are right about the article talking about only 1 year. But it obviously can be extended to multiple years.
The beauty is that it clearly covers three different scenarios which are realistically possible in the market, and in all three it proves that SIP fails big time.

Your third point is valid - encash after 20% return. These are the kind of inputs I (or any other investor) will look for. That’s why that article forms the foundation of any such important decision making about investment.

Please add on the valuable inputs for everyone’s benefit.

Thanks

13

SIP will fail unless you stick to it.
Nobody can time the market.
If you invest in a good fund or stock by SIP route, you should get good returns, provided the market is not in a prolonged bear market like happened in Japan. SIP encourages regular investing taking the emotion out of it. You get maximum benefit in a bear market- more units for your cash which will benefit you when market turns around

On a lighter note, it is the SIP flows which propping up nifty and sensex compared to broader market. Spread these forwards so that most people stop their SIPs and let the market crash and one can buy at cheap valuations

1 Like
14

SIP is an accumulation strategy. If you looked at last 20 years history of monthly returns, if you missed the top 5 months, your wealth would be considerably less. SIP is the only way to spend time in the market than to time the market.

15

So in essence:

SIP is unreliable…and the examples in that article are realistic :+1:

hmmm… but I am really sad to know that so much hyped up investment scheme turned out to be unrealistic…

At the end, the investors are prone to brutal market forces…Nothing works for sure in the market …not even disciplined investment like SIP :frowning_face:

16

I was of the view that SIPs are a good idea when I started reading this thread. So I thought I’ll check some facts… Think about it like this, if you had started a SIP in 2006 what would be the value of that today? I have just checked for HDFC TOP 100 fund and ICICI Pru Bluechip fund, just as examples. I started on Sept 3, 2006 and returns as in today Sept 3, 2019. Shocked to learn that returns are negative by more than 30pc. As in I’m SHOCKED TO LEARN THIS. I checked on mysiponline dot com.

1 Like
17

Basically even after 13 years the returns are all the way down.

18

What a waste… “Mutual Fund Sahi hai” and “thoda thoda SIP” campaign…

Telecast at prime rates during World Cup…whose money are they wasting on those costly ads??

19

Interesting…here we have a person claiming great returns from SIP :slight_smile:

https://tradingqna.com/t/sip-starting-rs-500-or-less/62098/6

Though he is asking for 500 Rs SIP :wink:

21

yeh i love weekly SIP not month :stuck_out_tongue:

22

Hi, Since you seem to be convinced SIP is bad, what is the alternative? As many people have said before, nobody can time the market. And no one who has a lump sum is going to invest as SIP.
In my opinion, SIP is the best way to accumulate funds or stocks to provide decent returns over long term.