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Maximizing Profits in Dull Markets: The Power of Systematic Investment Plan (SIP)

Updated: Jun 3, 2023



The world of investing is full of uncertainties, and investors often face the dilemma of whether to continue investing during bear or flat markets. In such a scenario, the systematic investment plan (SIP) strategy can be a wise choice for investors. SIP is an investment plan that allows investors to invest a fixed amount regularly, irrespective of the market conditions. In this blog, we will discuss the benefits of SIP during bear or flat markets and provide examples of how Indian mutual funds have generated superior returns by following this strategy.

Benefits of SIP during bear or flat markets:

  1. Disciplined investing: SIP is a disciplined investment approach that helps investors to stay invested for the long term, irrespective of the market conditions. By investing regularly, investors can avoid the temptation of trying to time the market, which often leads to losses. SIP helps in building a habit of regular investing, which is crucial for achieving long-term financial goals.

  2. Rupee-cost averaging: SIP follows the rupee-cost averaging method, which means that investors invest a fixed amount regularly, irrespective of the market conditions. This helps in reducing the impact of market volatility on the investment returns. In a bear market, investors can buy more units with the same amount, and in a flat market, they can buy fewer units, thereby reducing the impact of market volatility on the overall investment.

  3. Long-term approach: SIP is a long-term investment strategy that helps investors to stay invested in the market for the long term. In a bear market, investors can take advantage of the lower prices and stay invested for the long term, thereby reaping the benefits of the potential recovery of the market in the future.

Examples of mutual funds in India that generated superior returns through SIP:

We have seen several mutual funds in India that have generated superior returns by investing through SIP during bear or flat markets. For instance, Nippon india growth fund, Franklin India Prima Fund and HDFC Flexi fund have given more than 20% plus compounded annual growth rate (CAGR) in the last 20 years (as of Dec 31, 2022) which saw several market cycles. Similarly, even the Blue Chip Fund, the Franklin India Bluechip Fund gave more than a 20% CAGR return in the last 20 years. All these funds have been consistent performers and have generated superior returns through SIP.


Conclusion:

Investing through SIP during bear or flat markets is a wise investment strategy for retail investors in India. It helps in reducing the overall average cost of investment and avoiding the timing risk of the market. Moreover, it helps in disciplining investors to stay invested for the long term, which is crucial for wealth creation. Several mutual funds in India have generated superior returns using this strategy, and investors can take advantage of this by investing through SIP in well-managed mutual funds with a consistent track record.



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