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Is it time to start an SIP?

Experts say investing lumpsum with a three to five-year horizon could be better option

Joydeep Ghosh  |  Mubai 

Coins image via Shutterstock

For stock market investors, the pain doesn't seem to be coming down. With the BSE Sensitive Index or S&P Sensex really going nowhere for five years, investors have not seen much growth in their portfolios.

However, with the S&P Sensex down 4.6 per cent this calendar year, this could be a good opportunity to enter, say experts. "If someone has a horizon of one-two years, it could be a good time," says Gul Tekchandani, investment consultant.

Of course, one could lose some money in the initial weeks or months by buying stocks now. But over the medium term, there is money to be made. "I have been getting calls from investors on whether the market will fall more. It may or may not. But even if one has to live with some initial pain, there would be gains later," says a fund manager.

The question is whether one should go for lumpsum or start a systematic investment plan (SIP). Most feel the benefits of starting an SIP will be limited. "An investor can start an SIP anytime because if the market falls, there would be more units allotted to him. But in these circumstances, if the market was to turn around in the next few months, then the advantage will be limited," says Hemant Rustagi, chief executive officer, Wise Invest Advisors.

Accordingly, Rustagi feels investing a lumpsum could be more beneficial, as with a turnaround in the market, there would be more benefits even in the shorter run. "This is a good opportunity because after months, the market has taken some direction," says Rustagi.

When the Sensex first hit 21,000 in 2008, there was a lot of euphoria. But many investors who entered the market during late 2007 or early 2008 with lumpsum amounts have barely made much money. With the Sensex returning just five per cent annually in these five years, there has been nothing really for the investors. Consequently, many preferred to cut their losses and sell stocks or mutual funds whenever the market rose. In calendar year 2012, when the Sensex returned 24 per cent, 4.5 million mutual fund investors exited by closing their folios.

But staying away from the market will not help either. For those looking to have a good corpus at retirement, investing in the stock market is a necessity. More so, because India's inflation rate, the consumer price index, continues to be 8-10 per cent annually. Investing in good equity mutual fund helps build a corpus. For instance, DSP BlackRock Equity scheme, a multi-cap fund launched in 1997, has returned minus 11.46 per cent this calendar year (NAV as on June 21). But since its launch, the scheme has given 20.46 per cent annually.

Clearly, there is long-term money to be made in good mutual fund schemes or topline stocks. Look at every fall as an opportunity to enter. Like good times don't last forever, even bad times don't. But you need to be invested to make money.

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First Published: Mon, June 24 2013. 22:30 IST