does timing really matter while investing?...does timing really matter while investing? statutory...
TRANSCRIPT
Does timing really matter
while investing?
Statutory Details: Axis Mutual Fund has been established as a Trust under the Indian Trusts Act, 1882, sponsored by Axis Bank Ltd. (liability restricted to ̀ 1 lakh). Trustee: Axis Mutual Fund Trustee Ltd. Investment Manager: Axis Asset Management Co. Ltd. (the AMC). Risk Factors: Axis Bank Ltd. is not liable or responsible for any loss or shortfall resulting from the operation of the scheme. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
It is a widely held belief that smart investing is all about timing the market. As investors, we all wait for that perfect or ideal moment to start investing.
New investors go with the flow and the market sentiment – they invest when everyone else is investing and when the markets look promising.
The existing set of investors wait for the markets to fall so that they can invest more and make the most when the markets swing back into action.
We also hear various stories on smart investing, the most common being ‘buy low and sell high’.
So let us assume this was indeed possible and go back in time and find out what would have happened if an investor had invested at low points of the Sensex each year versus if the investor had invested at the high points of Sensex each year. The results are interesting.
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
On the other hand, let’s take a look at the this case where an investor invested ̀ 1,000 in equities for 10 consecutive years at the lowest level of the market every year
Investing at the lowest level of the market every year
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
35000
30000
25000
20000
15000
10000
5000
0
Assuming an investor invested `1,000 in equities for 20 consecutive years at the peak of the market every year.
Investing at the peak of the market every year
Peak
Lowest Level
Returns: 17.22% (CAGR)
Returns: 13.55% (CAGR)
Now let’s also take a look at this case where in an investor simply invested ̀ 1000 on the 1st of Dec each year, the returns would have been 14.53% CAGR!
Net, net, timing the market is not just difficult, but
also not worth spending time and effort. The smart thing to do is start a systematic investment plan – either monthly or yearly in which you pre-commit a fixed amount on a regular basis.
Advantages:
Ø
Ø
You invest small amount on a regular basis. So there is discipline to the investment process.
You end up buying more units when the markets are low and less number of units when the markets are high. Thus averaging out the unit cost.
Start now !And open your SIP account and Sleep in Peace.
SIP - Systematic Investment Plan