SIP now or later

POSTED BY Ramesh ON October 18, 2010 7:49 am COMMENTS (9)

Hi all,

Market is at high value now and everyone predicts that it will crash soon or later in less time.

Is it good to start SIP now?

The NAV of units we get thru SIP will be negative to a great extent once the market crashes, of course it will raise again after market picks up say 2 to 3 years.

I would like to hear your opinion on this.

To get a good opening in SIP is it better to start when the market is low? or it is better to start now even the market will crash soon and units we bought now will go down?


9 replies on this article “SIP now or later”

  1. Sunny Sodday says:

    SIP way is not just for capital appreciation but using compound interest. More delay will delay the use of compound interest in your favor. If you are delaying SIP to time the market, you are also ignoring the power of compound interest. So forget about the highs and lows of market and start investing now (not now, abhi to raat ho gayi) but ASAP.

    Santosh’s answer is well written and are golden(infact diamond) words.

    May god shower wealth on you. Happy life:)

    1. Santosh Navlani says:

      Thanks Sunny. Appreciate your compliment 🙂

  2. Santosh Navlani says:


    This question of yours is not uncommon. Many people manifest this behavior either thru skipping their SIP (by not keeping adequate balance in their account for SIP to go thru) or by postponing their plan for SIP.

    Imagine the guys who may have thought the same back in January 2009 – March 2009. With the thought of entering the market at the “right time”, they may have missed an opportunity. Even today, many people are waiting for market to correct but their wait has been getting longer.

    The biggest advantage of SIP is you remove the “vagaries” of market from greatly affecting your portfolio value. There is no right or wrong time to start SIP. And also there is “good-enough” time horizon to evaluate whether to enter the market. Just decide on your Equity component of your “asset-allocation” and buy appropriate schemes to match your plan. Secondly, people who ask this question greatly undermine the fund manager’s capability. Isn’t it safe to assume that the scheme’s fund manager is making appropriate decisions when the markets continue to go high – I mean he/she would definitely be booking profits or mitigate his/her scheme’s risk on a continuous basis??

    SIP should be the “ONLY” way you should enter the market. Even for greatest balanced funds like HDFC Prudence – an SIP for a period of 3 years (Jan 07 to Jan 10) would have generated a whopping annualized returns (XIRR) of 27.88% OR absolute returns of 80% WHILE investing a lumpsum would have given an annualized returns (XIRR) of 18.88% OR absolute returns of 92.78% over the 3 year period. I have purposely taken the period starting Jan 2007 as the markets almost reaching a peak.

    To cut it short – bull or bear markets, short or long horizon, what makes sense is decide on your Equity component & start an SIP straight away.

    Hope this helps you.
    P.S. Manish has written great posts on Asset Allocation, use that to find your Equity allocation before you start the SIP.

    1. Santosh

      Nice reply .

      Yes , the only way a common man can time the market is through portfolio rebalancing , which should happen every year or every 2 yr .


      1. Santosh Navlani says:

        Thanks Manish.

        I would agree with you. Portfolio Rebalancing should be used periodically. But again I would avoid the term “timing the market” through it. Its basically you sticking to your asset allocation plan rather than doing it to maximize the returns!

        Or am I reading something wrong than what you intended??


        1. Santosh

          No I meant timing the market only , the point is that everyone wants to sell at the top of the market and buy at the bottom , if you closely look at the portfolio rebalacing, anyone who seriously does it should be selling part of his equity at the current moment , and he must have bought some equity at the time market was deep down in 2008 end .

          So all I am trying to say is , its a common person successful way of timing the market, even though they dont realise it and thats the reason portfolio rebalancing makes returns better 🙂

          I hope we are on the same page now ?


          1. Santosh Navlani says:

            Yes, Manish. It was an indirect connection you made ;-). Nevertheless, the right one!

  3. Remember the golden rule – “Do not try to time the market”. Start your SIP today if you want to start. You’ll get more units in down market at an average price. You’ll never gather enough courage to invest if sensex crashes again. So, start now.

    Hope it will help you.

  4. Jagadees says:

    I would say the market level does not matter whether it is 20k or 10k to start an SIP in a diversified mutual fund if ur investment horizon is of 7-10 years.
    It is a consensus view that the market is fairly valued and correction is inevitable. But we dont know when that correction s going to happen. we cant say how long the irrational behaviour of bull run will extend. sometimes it can extend even for 6 months. For e.g. If the US goes for another round of quantitative easing a.k.a money printing to boost their economy, then some of the funds will come to emerging markets via FII investment and may take market to new heights. nobody know where the market will be after 6 months.
    SIP is a valuable alternative to market timing. If you are uncomfortable with current market valuations then u can start SIP in one or two large cap fund alone and can delay investment in multicap and midcap funds(if any) still market corrections.

    Happy investing 🙂

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.