Chapter 5 : SIP Vs SIP stay away from SIP

SIP means Systematic Investment Plan

Many fund houses and investors suggest small investors or retail investors to invest thru SIPs. SIPs utilize the power of compounding to grow your wealth.

If you opt for thru Mutual Funds or PMS (Portfolio Management Services), they will give you two options. Either invest in lumpsums, means investing at a time. Or SIP, means investing regularly, monthly quarterly or any said period.

SIP is almost similar to Bank Recurring Deposit. Except the fact that the money is invested in share market.

Majority of investment from retail customers is thru Mutual Funds only. The retail customers who are venturing directly into equity is less than 4%. It is improving year on year we no need to bother much about it.

Whether SIP is good for me?

If you don’t have free time I strongly suggest you to go with SIPs. But if you can spend 15 to 30 minutes daily to manage your portfolio it’s better to stay away from SIP.

Equity Vs SIP

In Equity you have more freedom to choose when to invest and when to sit idle. SIP will not allow you to do that, even if you know that it is not right time to invest in market SIPs are a regular investment.

Kotak India EQ Contra Fund – Direct Plan – Growth : MoneyControl

I have taken SIP example of highest rated Mutual Fund, Kotak Contra fund. You can find the Mutual Fund ranking given by CRISIL in Moneycrontrol website. Kotak Contra fund is the top performing fund with Five Star rating by CRISIL.

Lets see the SIP returns

Source : Moneycontrol

You can see the return is negative or almost zero for the first eleven months due to bear market. The returns changed to positive in the month of March only. In a Bull Market any Mutual Fund or equity investment yield returns. But as an investor you should be able to sustain through bad times i.e Bear Market.

You can create your own SIP but it is Smart Investment Plan. Smart investment Plan means decide yourself whether to invest when share value appreciated and when sell a stock. Read Mixed Strategy to learn survival trading.


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