SIP At Peaks Or Bottoms? Market Timing May Not Be As Crucial As You Think
Systematic Investment Plan, or SIP, is emerging as a popular investment method. It offers a means for disciplined investing, as you set aside a fixed sum of money every month for future savings. A SIP offers potential for long-term wealth creation, as you gain from the power of compounding and can get a diversified portfolio with just one investment, which is managed by an expert. But what is the right day to start a SIP?
Timing matters a lot when you're batting – like finding the sweet spot on the bat. In mutual fund investing, it might matter a lot less. A study by Motilal Oswal Mutual Fund shows that investors who started SIPs at market peaks and those who began at market bottoms ended up with nearly identical long-term returns.
The first period examined in the study was from 2000 to 2005, a time marked by the aftermath of the global dot.com bubble burst and the Indian market's subsequent recovery – a phase of high volatility. During this period, the Nifty 500 Index's price-to-earnings (PE) ratio swung sharply, peaking at 37.26 on February 24, 2000, and bottoming out at 11.58 on September 21, 2001. This minimal return disparity is attributed to rupee cost averaging, a key feature of SIPs, which helps smoothen out the effects of market volatility.
The study reinforces the idea that regular investing across market cycles reduces the risk associated with market timing. Even though starting SIPs at the bottom of the market may deliver slightly higher returns in the short term, the advantage diminishes considerably over time.
Experts point out that the probability of consistently investing at market bottoms is extremely low, making market timing an unreliable strategy.
'Time in the market beats timing the market," said Pratik Oswal, Head of Passive Funds at Motilal Oswal AMC. Financial advisors echo this view, recommending consistent and disciplined investing for long-term wealth creation rather than attempting to predict market movements.
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Aparna Deb
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First Published:
July 30, 2025, 12:22 IST
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