When to start SIP: above or below the market cycle – CNBC TV18

The market time is almost impossible. No one can predict the exact top or bottom of the market cycle. However, an analysis by Whiteok Capital Mutual Fund recently highlights this investment dilemma – investors should start their systematic investment plan (SIP) at the market peak or the lowest point of the market?

SIP on Market Pix vs. Bottoms: What Data Shows

The study examined the BSE Sensex Tri data for the last 28+ years and analyzed the period when the market fell more than 20% from its peak. Two fictional investors were compared – one in SIP and one more market climb at the height of one market.

key findings:

High money creation on market peaks: While the return for SIPs launched on the bottom of the market was slightly higher, the total money made in the terms of the rupee was far more for the SIPs launched at the summit.

The cost of delay is important: Waiting to hit the bottom of the market before starting SIP can be expensive. The longer the time it reaches the bottom, the more opportunity cost.

Long -term returns convergence: In an extended period, the margin of return between SIPs initiated on peaks and troughs becomes negligible.

For example, if an investor had started all 10,000 monthly SIPs at the peak of the 2008 market cycle (January 2008), he would have invested ₹ 20.4 lakh by December 2024. This investment will now be worth ₹ 72.1 lakh with XIRR. 13.5%.

On the other hand, if the investor waited till March 2009 (below the market), he would have invested ₹ 19.0 lakhs, and his portfolio will be priced at ₹ 61.7 lakh- ₹ 10.5 lakhs compared to the first investor.

When should you start a sip?

The data emphasizes an essential investment principle- the market cycle will come and go, but the actual risk is delaying investment.

The power of compounding works best when given time.

Therefore, investors should focus on starting their SIP as soon as possible and remain disciplined. Whether the market is at a high or low level, being invested for long periods is the key to money creation.