The Signal: Systematic Investing – The PPE For Your Portfolio
3 months to 2021, Covid 19 is still ringing bells of doors (health) and markets (wealth) across the globe. Questioning systems and stressing operations, global economies are resorting to their piggy banks to curtail impositions to be in-position to localize the new-normals.
As Covid 19 continues to be a weekly event of learning, the weekends continue to be dictated by Fisdom’s attempt to make-&-break your earnings. The simplest way to do that is by addressing the simplest mode of investment – Systematic Investment Plans
“An Ocean Started Out As A Drop Of Water, For A Drop Over Another Culminated Into The Voluminous Water Body”
The above adage breaks down the financial complexity involved in the making of a SIP. Like Oceans, SIPs are designed to be an all-weather investment vehicle making the best of the markets in bullish or bearish times.
Markets being cyclical & event-driven, have inherent volatility which many try to bank on by adopting unique strategies but come out with more pain than gains. The common learnings we come across from those attempts are:
- Timing The Market Instead Of Time In The Market
- Undisciplined Approach
- Emotion-Driven Exits
The structure of SIP puts a earmuff to noise, inculcating regular and disciplined investment approach. Limiting human bias limits your window of errors. And if there’s 1 theme the markets have carried since the dawn of the new century, “Terror By Error” is to be its top feature.
Over the last 20 years, the markets have been subject to various crises’, resulting in plenty investment principles losing ground. However, the principle of SIP found favoritism, courtesy of its ability to tailor market’s fever to fervor in time-agnostic fashion.
The Graph below shows landmark market crashes over last 2 decades and how SIPs navigated them in a financially savvy manner:
As Can be seen, SIPs are the perfect scenario-sans investing tool, which have held their groove across market turmoils.
In fact, SIPs can be utilized to boost upside return potential in times of crisis, as investors can accrue higher units at depressed market levels by keeping the SIPs active and emotions inactive. The graph shows how investors who kept SIP ongoing would have realized ~Rs.50 Lakh on Rs.5 Thousand monthly investments!
In times pre-Covid, in-Covid and Post-Covid, markets have shown how every trough is followed by a pointed peak. It is in times of rough, that markets yield the best opportunities, as all hunting becomes bargain hunting.
It is then when the flexibility of SIPs bear fruit for investors as they can modulate their monthly monies on the click of a button (Yes, Your Fisdom App Makes the Process That Easy – Download Now On App Store / Play Store).
The Bottom-right graph shows how investors who increased their SIP amounts by mere Rs.500 on monthly basis realized their portfolio grow by ~3x Times!
More so, an additional 10% increase in monthly SIP resulted in Portfolio/Profit growth of 2.4x and 2.1x respectively over those who kept stable their SIP figures through investment horizon of 20 years!
However, today may be different as Covid-19 has changed as much as challenged the financial position of many. The temporary halting of SIPs is perceived as cautionary action as market mood shifts to wealth conservation over proliferation and people lead-&-plead for moratoriums.
But, SIP’s being SIPs have got you covered, for the extension in SIP can do away the worries of the in-extensions of muted loan periods.
The graph below shows how investors who stopped SIPs in 2008 but stayed invested for the long-run would have realized portfolio growth of 7.2x times!
So remember, SIP is the chicken which lays the Golden Eggs. But for eggs to be laid, the chicken has got to be fed.
We at Fisdom plan to keep writing on SIP for as long as SIP stays exciting, and oh yea, SIPs will always be exciting and more.
Having shared our views, do you have any fun insights that you want to share with us? Then please write away, for we excitedly await your response. We may feature it in the next piece too, so keep an eye out for that!
Till then, Happy Weekend.