Are you planning to start investing in SIPs, but is worried that marketups and downs can harm your return? Many investors become entangled and try to time their Systematic Investment Plan (SIP) contributions (SIP) to coincide with the monthly lows of the market. But a recent study by Motilal Oswal Asset Management suggests that this effort can be largely meaningless.The study showed that the difference in return on longer periods, whether you are investing at the highest or lowest point of the month, is negligible. For example, in monthly SIPs made in the Nifty 500 index for a period of 10 years, the return gap between someone who has invested every month on the Peak of the Market and another who succeeded in reaching the soil only 1.13%.“The chance of being lucky and consistently investing on the lowest index value every month is mathematically close to zero,” said Pratik Oswal, head of passives at Motilal Oswal AMC.More than a SIP of 10 years, investors who have consistently caught the monthly lows earned 15.82%, while those who invest in the highlights earned 14.68%, etc.
Although the margin is slightly more pronounced in the short term, the benefit fades over time. In a SIP of a year from April 2024, for example, someone who hit the lowest point every month earned 1.17%. In the meantime, an investor who unconsciously bought a loss of 9.9% at the highest point every month, a Stark 11.04% difference.“SIPS must at least go through a market cycle of 5-7 years,” said Amol Joshi, founder of Plan Rupee, said.The return gap drops to only 3.08%against the five -year figure. For more than 15, 20 and 25 years, the difference further narrows to 0.73%, 0.71%and 0.59%respectively.Wealth advisers agree that investors are better aimed at consistency instead of precision. “Time in the market is important because it is impossible for retail investors to tim the markets,” said Viral Bhatt, founder of Money Mantra.
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