Many new mutual fund investors often unnecessarily waste time on things that really don't have any major change on the outcome. One such example is selecting the date for their monthly Systematic Investment Plan (SIP). Should it on 7th or 1st? Is buying on 28th the best SIP strategy given the roll-over in futures & options (F&O) segment?
To answer these questions, Value Research put its data-crunching skills to test. We looked at 3-year and 5-year SIP returns on every single date in a month. The results were not surprising. SIP dates have no major effect on long-term investment strategies. Read on.
Numerologists believe lucky numbers can bring them good luck. In China, it is customary to regard even numbers as being more auspicious than odd ones. So, gifts are given in even numbers for the celebration of all occasions. This, however, doesn't hold a meaning in the world of financial investments.
Look at the 3-year SIP returns of equity fund categories for all even-numbered dates. For instance, a 3-year SIP banking fund ending on 1st June has yielded 20.2%, but it isn't very different from 20.4% on the 15th. An SIP ending on 11th June and another on 19th are not very different.
Truth be told, SIPs in pharma and technology funds haven't worked. They have lost money on any even-numbered or odd-numbered dates that you chose in the past 3 years. That's a big takeaway!
Odd isn't really odd
Odd numbers are considered not lucky, except number 7 in some cultures. Does number 7 hold any special power? Our data doesn't indicate so.
Because monthly SIP investments buy MF units every month, be it high or low, rupee cost averaging works. It doesn't depend on any single date.
See the table below for 3-year SIP returns on odd-numbered days. Pay close attention to 7th. In popular culture, 13th is considered an unlucky number. However, we couldn't find any evidence of the same. Judge for yourself. Is 13th really lucky than 3rd or less lucky than 27th or 29th?
5-year number game
Despite the fact that long-term investing strategies are used to remove any short-term effects, many of us don't completely understand the practice. You can select your SIP dates as per your wish and convenience. A date has really no major effect on a SIP. Sure, a market crash on one day and a massive rally on the other can happen on specific dates.
The truth is, in 5 year, small-cap funds have grown your money by 28-29% year on year if you did SIPs on every available date. In the same vein, your money grew by 3-4% CAGR if you had put money in international equity fund SIPs. Tax-planning funds would have given between 14-16% average SIP return in the past five years.
It doesn't really count much on which date you choose. What probably matters is where you invested. Look at the tables below for 5-year SIP returns for different equity fund categories. What are your thoughts? Do let us know.