POSTED BY December 4, 2010 11:54 am COMMENTS (8)ON
Every body is talking about SIP.
I accept all +ves of SIP & also gained from it in last 3 years of continued SIP.
But what are its -ve points?
There must something -ve about SIP which retail investor should know about.
Team ..Your comments plz.
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8 replies on this article “Negatives of a SIP”
Much more on this.
Your points are absolutely correct but that does not take away anything from SIPs.
In my view a long term investor can use a regular SIP of say half the amount and the other half for not so regular lumpsums. If you see a large dip, alongwith the regular SIP, you can time your buy with a lumpsum (Not sell!).
Another good thing with SIP in regular fund (except ELSS), the exit load is counted from the start date of SIPs and not from the last date of SIP. So if you have SIP’ed in a fund from 1st jan for 12 months. From next 1st Jan, that investment will get LTCG status. (correct me if I am wrong). 🙂
What I understand is every buy is new in SIP
so when u buy from 1st JAN to 1st dec
Only JAN purchase will get LTCG status on next JAN
Feb buy will on FEB next year & so on….
so Dec purchase will get LTCG status on DEC next year
The only problem is how to see whether there is bear or bull market at the time of investment!
20-20 hindsight is good. But there is no one with a 20-20 foresight. No one thought there was an impending doom at previous high, and similar no one saw the sudden recovery in Mar 09.
In my view, doing SIP is not bad at all except for ELSS, where lumpsum is a better thing.
when you say I dont want to time the market , then the whole argument goes off.
What I am saying is true for some one more inclined towards taking more detailed decision based on other factions , Like for example, with Nifty-PE near 25 in Dec 2007-Jan 2008 , It was a time when markets were supposed to be very high , anyone entering ELSS that time would have been a fool like me , because after 3 yr market would be at same position ,
While I didnt knew that that Nifty-PE thing that time, I know it now . so ELSS is not the best thing to do at the moment , espeically for a person doing it for tax saving or with a short time frame like 3-4 yr
In the same way Nifty-PE was at 12-14 in 2008 end and , and historically it was a time when markets were really over-sold and were suppose to go up sooner .
It was a time for one time investments and not SIP , as with SIP it would be only first few installment which will help you buy units at lower price, rest all will be at high . So the best thing was lumpsum for someone with good risk taking ability .
However, I guess you are taking from a non-risk taker and a very long term investor perspective .
How is SIP not best thing to do in bear markets! I think that it is a good thing there.
I meant at the end of the bear markets , Because then its one of the best time to put most of the money in lumpsum .
There are some negatives
– SIP is not the best thing to start at tip of bull run like at the moment , also its not the best thing to do in bear market . This is considering SIP for shorter term like 2-3 yrs . People who started SIP in 2008 start will know this , also people who started SIP in the end of 2008 will know this .
– SIP in ELSS is locked in for each installment .