The past seven years' date-wise trend of the Sensex and major equity funds clearly suggests that between the 23rd of a month and the 2nd of the next month, the Sensex is lower than during the balance period.
The reason, to some extent, can be attributed to the expiry of futures contracts on the last Thursday of each month, which can lead to selling, to close positions in the market.
Once the futures expiry is complete, the market starts consolidating again, inflating the Sensex and NAV values.
We observed the NAV behaviour of four equity funds - HDFC Top 200, Reliance Vision, Pru ICICI Growth and Franklin India Blue-chip. As is evident from the adjacent table, the NAV trend for the mutual funds under observation is similar to the Sensex trend. This indicates that an investor planning to go in for a SIP has to understand the trend and then take the plunge.
The trend in the years prior to '03-04 is similar to that of the Sensex. In all the earlier years from '00-01 to '02-03, investors would have made a saving if they had invested between the 23rd of the month to the 2nd of the next month. So, plan well and make sure to maximise your returns!
HOW DO SIPs WORK?
SIPs work on the premise of rupee cost averaging. Even seasoned investors find it difficult to predict the ups and downs of the stock market. Hence, the best resort is to go in for a disciplined way of buying units on a monthly or quarterly basis.
By doing so, investors can avoid the temptation of timing their investment. 'Market timing' is an activity that is best left to professionals. Moreover, the way to weather market cycles is to invest throughout the cycle, so that the investor automatically ends up buying more units at lower NAVs and lesser units at higher NAVs. Therefore, on a net basis, investors will be able to average out their unit costs over a period of time.
The reason, to some extent, can be attributed to the expiry of futures contracts on the last Thursday of each month, which can lead to selling, to close positions in the market.
Once the futures expiry is complete, the market starts consolidating again, inflating the Sensex and NAV values.
We observed the NAV behaviour of four equity funds - HDFC Top 200, Reliance Vision, Pru ICICI Growth and Franklin India Blue-chip. As is evident from the adjacent table, the NAV trend for the mutual funds under observation is similar to the Sensex trend. This indicates that an investor planning to go in for a SIP has to understand the trend and then take the plunge.
The trend in the years prior to '03-04 is similar to that of the Sensex. In all the earlier years from '00-01 to '02-03, investors would have made a saving if they had invested between the 23rd of the month to the 2nd of the next month. So, plan well and make sure to maximise your returns!
HOW DO SIPs WORK?
SIPs work on the premise of rupee cost averaging. Even seasoned investors find it difficult to predict the ups and downs of the stock market. Hence, the best resort is to go in for a disciplined way of buying units on a monthly or quarterly basis.
By doing so, investors can avoid the temptation of timing their investment. 'Market timing' is an activity that is best left to professionals. Moreover, the way to weather market cycles is to invest throughout the cycle, so that the investor automatically ends up buying more units at lower NAVs and lesser units at higher NAVs. Therefore, on a net basis, investors will be able to average out their unit costs over a period of time.
3 comments:
please send me "get your timing right(part-2)" at brijesh_07@hotmail.com
please leave a copy at dhanesan.ajit@gmail.com
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