People often consider that markets are on the higher side and ask if they should start SIPs right away or wait for a couple of months, Manuj Jain, co-head–products and strategies at WhiteOak Capital AMC, told BQ Prime’s Niraj Shah.
“People who time the market ended up making less money as compared with somebody who started at the top.”
In the last 27 years, there have been nine periods when markets have corrected more than 20%—the difference between somebody starting at the top and bottom is roughly only 10 basis points, except in 2020, because it has been only 3.5 years, said Chirag Patel, co-head–products and strategies at WhiteOak Capital AMC.
“Do not wait for correction, because when you’re doing an SIP, you are automatically averaging at all instances. So, you are taking advantage of all those instances,” he said.
“Our study shows that actually, whether you do daily, weekly, or monthly SIP, over a long period, your return difference would appear after the third decimal point,” Patel said.
According to him, the most important thing is that investors should run an SIP as long as possible, such as 10 years or 15 years.
If you’re looking for at least a positive return, come what may, at least eight years is the time period to stay invested, Jain said. “The moment you cross eight years, historical data suggests, anybody who has run his SIP for eight to 10 years, till now they haven’t got any negative return from Sensex.”
About 99% of the work is done when you start early, and run it for a long period of time with the discipline of investing constantly, Jain said. “The rest, like which day you select, which sequence you select, whether you pause for a couple of months or not, this is just 1% of the entire concept of SIP.”