I am a regular investor in the equity market and also in mutual funds. I have 4 equity diversifies funds running in sips and each has completed just one year and half. Well, I am an nri and so cautious about indian investment environment(we are all, being far away).
I want to tell u the magic of SIP. When I started the SIPs the market was on the threshold of growth. There was a resistance for a long time(i think late 2006 and early part of 2007). My Agent adviced me and I told her to leave the papers with me and I burnt the midnight oil and finally came up with the idea of getting into SIPs instead of lump sum investment.(when March 2007 and later period came I remember hitting myself with a pair of shoes for not having made lump sum investment).
But today, March 2008, I am glad I did not .
Here’s why
Reason 1: the bulls and bears always alternate in the market.
It’s the simple economic theory "the vicious circle" - I somewhat had guessed that during the initial decision making phase
Reason 2: There is this open truth that **even a long standing fund cannot outperform the benchmark over a long period of time -
*All my funds had a returned below benchmark during the last quarter of 2007 and so ultimately their CAGR is affected.
Reason 3: The price of units gets averaged during the cycle and hence the investment made through SIPs is always less(as much as 20%) than the NAV at any point in time - On a review of my SIP portfolio I found that a certain diversified fund has given me about 57% return by way of Capital appreciation in spite of being in a Volatile market.
*GOLDEN RULES FOR INVESTING THROUGH SIPS:
Rule 1: Choose a good fund, do a thorough research, take help if necessary
Rule 2: Decide the amount yourself based on your goals
Rule 3: Keep investment horizon of minimum 5-6 years. It could be like planning for your childrens needs.
Rule 4: Remember to stand by your goals, stay put even in an uncertain market
Rule 5: Continue the SIP payments for 3-4 years
Rule 6: Apply Rule 4 again and again
Rule 7: Wait for that cycle when the Bull run is finished and Bears are about to take over closer to your investment horizon.
Now, Dig in deep, book profits and have fun!
Now, who ever said that vultures are scavengers!*