Use this simple rule to reduce your risk with Mutual Funds Investment


Long term investing is very much person specific and simple SIP is still best for almost everyone

Someone may like to spend 15 minutes extra every month to decide SIP Top-up which can generate extra XIRR.

why take all the pain monitoring everyday the index

Proposed scheme suggest check how much is the dip once in month… say on SIP day and top up in proportion to dip. I requested @KirubaKaran for back testing as he has setup and access to historical data to. Hopefully such simulation can give some thumb rule to decide how much one can do SIP and how much money can be kept aside for investing in dip of my investable surplus.

Invest in dips may be gives 3-4% gains above the periodic SIP set and leave for a decade,

Yes… question is how you define what is dip and how much you want to invest in that dip or you want to wait for more dip on next day.
Proposed scheme tries to solve this question, by calculating topup every month on SIP day by looking at dip.
This way extra capital gets deployed in earliest opportunity .

Thanks @cvs & @slow … your comments are as thought provoking as OP @KirubaKaran.
It helps me to put my thoughts in more organized manner for long term investment.

yeah you’d want to time the SIPs. I am seeing a lot of NFOs recently with this approach of timing and investing in the lows.
As an example, Quant ( i am not recommending it or anything) MF in particular seem to do the data analytics and always topping the category best with the highest alpha.

I do not seem to have the knowledge or knowhow that you are presenting here, so Lets’ say if i had to do such, shouldn’t i just be investing monies into Quant? or if i have a chance to go with PMS that can return at high alpha (over 2 percent above the index excluding their charges and performance), shouldn’t that be enough?

I know this may give me a slightly higher percentage, but still i am curious to understand what i should be reading / understanding here.

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Umm… not very sure with if words convey meaning. SIP date is still fixed. only thing is that on that day decide if there is scope to invest additional amount and if it is. how much it should be.
There are brokers who use this approach with the name of smart-SIP, V-SIP, Flexi-SIP. Not sure if any MF/NFO is doing so.
Only product which I know works in passive allocation in equity depending on market and not predicting market tomorrow is NPS.

OK… Yes, if you think anything is going to give you returns more than index for lifetime… (say for next 30-50) years depending on what is current age and own life expectancy , why not simply invest in it and forget about everything else,

There may exist one or more PMS or MF which will give high alpha for lifetime but general investment wisdom (refer SPIVA reports and there is ample discussion in this forum) suggest that investor like me with average intelligence may not be able spot such PMS or MF.

Ultimately everyone has different earning profile, different risk tolerance. No strategy, no rules works for all the time and for everyone. One has choose something what he/she thinks right in own context.

OP @KirubaKaran presented a simple rule to preserve wealth by limiting drawdown during “post-earning” phase. so I though why not think over strategy which gives slightly extra XIRR and validate with OP.