SIPs are a small step in the ladder

I’ve been busier than usual for the past few days and I’ve only been able to look at headlines and glance at my portfolio from time to time.

I looked at my portfolio today and saw that iShares S&P India Nifty 50 Index Fund which is a Nifty based ETF that trades on the NASDAQ, and was down about 5% a month and a half ago is up 10% today. As much as I like to say that it is the nature of the markets to surprise you, and you should always expect this — I was really surprised to see this move.

Nifty itself hasn’t moved as much during this time period, and it is the appreciation of the Rupee along with the Nifty that has brought about this quick positive up-move.

The last time I bought iShares S&P India Nifty 50 was on August 27th of this year, and at that time the dominating thought in my mind was how much should this fall further to warrant more purchase? I couldn’t imagine at that time, and this is not too long ago that the ETF will be up so much in just a matter of days. I bought this with the intention of holding it for a long time so it didn’t matter if it was up or down in a few days.

This is what I had tweeted then.


If you follow me on Twitter, you can pretty much see that there is a very simple pattern I follow. Buy when the market falls and sell when it rises. The buying is usually a lot more than selling because I usually buy in installments but sell in one lot.

This strategy has worked well for me since a number of years, and I was wondering today why this simple plan is not part of mainstream advice, and why it comes across as market timing which most people absolutely abhor.

For any long term investor who views buying stocks as buying businesses (a la Buffett) – why is price not a factor while making a purchase?

I like the concept of SIPs (Systematic Investment Plans) to the extent that I feel that they save people from themselves by enforcing discipline on them and not selling in panic, but this can’t be the final stage of how you view and invest in equity.

If you invest in shares at all, and it is quite understandable if you don’t, then the ultimate goal should be to reach a place emotionally where you can have the courage to buy more when the market falls and sell off when you see euphoria in the market.

This is of course very hard as I know from personal experience and not many people are able to do it. That is perhaps the reason why not many people write about it and it is nowhere close to the mainstream idea on equity investment.

If you have SIPs then I’d suggest giving this a try. For anyone beginning, I think an easy way would be to save some money specially with this purpose, just let it lie in a savings account which can be easily accessed by you, and identify some stocks and mutual funds that you would like to invest in. Then when you hear panicked stories on the news, and read about doom and gloom in the papers, use that money to buy stocks.

You risk the money you invest, but the return can be learning a very profitable process that will continue to reward you throughout your life.

6 thoughts on “SIPs are a small step in the ladder”

  1. I have tried to do this but I invariably fail when the downslide is even a bit prolonged. For e.g. during the 2008 fall, I used to buy the Benchmark (now GS) Nifty ETF. But then I lost nerve when the slide kept on going :-(, and the bad news kept pouring. It takes a lot of courage to keep buying during times of fear.

    On the upside, I never adjusted my SIPs based on “market conditions” and so sit on a decent profit in MFs. That probably is due to inertia also :-).

  2. There is a version of SIP which mimics the style of buying low and selling high.
    TIP – IN this the monthly investment varies with the current performance of the instrument being invested. If the instrument corrects, more money gets invested while in a upward trend lesser money gets invested.

    1. I have tried a VIP and the result was worse than an equivalent SIP during 2008-10 period. One instance hardly means anything, statistically speaking. However, that was a learning for me i.e. whether an SIP or VIP or something else, one cannot blindly follow a technique.

      My experience is largely in-line with Manshu’s i.e. In addition to techniques one also needs to be alert and smart.

  3. You are so right Manshu. But its hard to cultivate once one has burnt their fingers.Like in 2008 so many stocks fell down never to rise anywhere to their old glory. Though on hindsight they were wrong purchases in the first place.

    1. 2008 also happens to be one of the best periods for people who invested heavily during that year, or maybe not just 2008, but early 2009 as well.

      I’m pretty sure a crash will come again, that is just the nature of market, I don’t know when or for what reason, but if we are prepared for the crash by having a lot of investable cash then it can be a blessing instead of a curse.

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