[skchettry]

Originally Posted by bluevolt

I used to love read economic times especially the weekly ET wealth magazine, now whenever I read it with 'Analysts' recommending to continue SIP even in the current bloodbath in stock market I feel like tearing away the newspaper.

I have a different opinion on this. Discontinuing SIPs during the bearish phase and starting again during the bullish phase are basically against the very reasons why SIPs are there in the first place.

My view is that if I discontinue my SIPs because of the current downturn, I am losing an opportunity to buy those funds at lower NAVs. Supposing I stop these SIPs now and come back to the market once things brighten up, may be one or two years down the line, I would be purchasing these funds at higher NAVs. Thus my average buying NAV would be higher and so my returns would be lower.
Of course I am talking of long term investments wherein market cycles are covered and also referring to funds that have been performing well over a longer period of time. The past performance may not be an indication of future returns because of various dynamics involved like market conditions, change of fund managers, changes in holding pattern etc.
It is painful to see one's portfolio during such times; but I am sure if I look at it after the market picks up at a later stage (I don't know when), I would be happy (Wishful thinking? Yes, may be).

Regards
Sravan

[shipnil]

Originally Posted by bluevolt

I used to love read economic times especially the weekly ET wealth magazine, now whenever I read it with 'Analysts' recommending to continue SIP even in the current bloodbath in stock market I feel like tearing away the newspaper.

Originally Posted by skchettry

I have a different opinion on this.

I too agree with skchettry. As a retail investor, we may never be able to predict accurately market peak or bottom, and hence may not be able to time it. Hence averaging, through SIP, would be the suggested approach. Stopping them now does not make sense.

In fact, I am thinking of using this as an opportunity to reduce the khichadi that I have made over past several years and then consolidate them into manageable number of funds. The reason is, some of them are in profit and some in losses. Net net, I may not be liable to pay any tax.

[DigitalOne]

Originally Posted by shipnil

In fact, I am thinking of using this as an opportunity to reduce the khichadi that I have made over past several years and then consolidate them into manageable number of funds. The reason is, some of them are in profit and some in losses. Net net, I may not be liable to pay any tax.

Yes, this is right time to right size the portfolio without any tax implications.
--
I also believe that this global slow down is temporary and will last for a year or so at max. Why?
1. Unlike past recessions (in 2001 or 2008) this isn't a bubble-bursting recession. There is no systemic risks in the global economies. Even China-US trade war would eventually be negotiated out.

2. Stable governments all over the world, except England. All over the world there are business friendly stable governments (India, US, China, Brazil, Russia, Japan etc). Also Trump will easily win next year.

But I may be wrong as much as the "analysts" are.

[poloman]

Originally Posted by shipnil

Hence averaging, through SIP, would be the suggested approach.

Averaging may not work always atleast in direct investing. It may be somewhat safe in mutual funds. But still you should know what you are doing. Blindly following so called experts may end up in huge capital erosion. Many might have read this article from Zerodha CEO on the perils of averaging taking the case of yes bank as an example. This clearly shows the psyche of retail investors and should be an eye opener for everyone.
https://zerodha.com/z-connect/trader...ng-on-yes-bank

[graaja]

Originally Posted by bluevolt

I used to love read economic times especially the weekly ET wealth magazine, now whenever I read it with 'Analysts' recommending to continue SIP even in the current bloodbath in stock market I feel like tearing away the newspaper.

Stock markets always have their ups and downs. SIPs average these ups and downs and result in lower average cost of purchase so that when the markets turn around, you will see higher returns. So, logically, when the markets are going down, one should continue with the SIPs as you would be buying cheap. Patience is the key. This works only if your investment horizon is more than 5 or 7 years. Watching the NAV and fund value every day only gives you heartache.

But refrain from bulk investments in a bear market. Bulk investments should be made in low risk instruments and should be invested in the markets when they turn around. Or you can do a STP (systematic transfer plan), where you periodically transfer some amount from the low risk instrument into high risk instrument. This way you will be still getting a lower average cost.

Originally Posted by bluevolt

The actual rule of thumb is to use your own wit when managing personal finance and make decisions not on basis of any one else's recommendations.

Absolutely. All said and done, the final decision has to be made by the individual depending on his understanding of the market, his risk appetite etc. I have seen friends getting too aggressive and losing money in the market and have also seen others who were too conservative and missed opportunuties to capitalize on market corrections.

[aargee]

Originally Posted by bluevolt

I feel like tearing away the newspaper

All newspapers these days are like paying to read all the negative news!

Originally Posted by bluevolt

These are the 'Analysts' who recommended investments in the stocks that are suffering the most these days. They used to be their hot picks!

They're employed to bring more money into their firm & they're dutiful to it

Originally Posted by bluevolt

The actual rule of thumb is to use your own wit when managing personal finance and make decisions not on basis of any one else's recommendations.

Very true & well said; at the same time, just stop putting money into SIP as almost all the prediction say the recession/depression is to last for next 2 years. So its better to wait for the market to fall down further & bottom out before investing again.

While its true that no one knows which is the bottom, when we are watchful, we can get to know the bottom, if not the bottom most. The averaging is the key here

[lapis_lazuli]

Originally Posted by aargee

wait for the market to fall down further & bottom out before investing again.

In an upward cycle SIP doesn't help much, does it?

[aargee]

Originally Posted by lapis_lazuli

In an upward cycle SIP doesn't help much, does it?

In a bull market (upward), SIP helps to realize lesser % of profits

[SmartCat]

SIP helps an investor develop his savings and investment habit. Primarily useful for somebody who is:

- just starting off investments (to instill discipline)
- not really interested in the stock market or economy
- too busy to make investment decisions.

If you do NOT fall in the above 3 categories, it makes more sense to invest strategically. You can maximize returns by doing exactly opposite to what other investors are doing. That includes -

- investing in FALLING markets.
- investing when there is bad news about the economy.
- investing at the time of global crisis (geopolitical or financial)

If you cannot stomach the mark to market "loss" in portfolio, it is best to stick to SIP. Investing only in 'bull markets' will give you lower than Fixed Deposit Returns. That's because you end up buying at higher and higher prices.

[audioholic]

I was investing in SBI Small cap fund from last year when it opened. But somehow, my overenthusiasm and risk taking ability made it the second largest fund in my portfolio. Due to the laggard situation of the market, I decided to cancel my SIP in the smallcap fund and want to invest in Equity hybrid fund instead. I currently have SBI EH and Mirae Asset Hybrid Equity fund in my portfolio. It has remained in good shape even in the battered market.

[JMaruru]

Originally Posted by SmartCat

You can maximize returns by doing exactly opposite to what other investors are doing. That includes -

- investing in FALLING markets.
- investing when there is bad news about the economy.
- investing at the time of global crisis (geopolitical or financial)

If you cannot stomach the mark to market "loss" in portfolio, it is best to stick to SIP. Investing only in 'bull markets' will give you lower than Fixed Deposit Returns. That's because you end up buying at higher and higher prices.

+1

I could NOT agree more.

'Warren Buffet' once said that as an investor, it is wise to be 'Fearful when others are greedy and greedy when others are fearful.' This statement is somewhat of a contrarian view on stock markets and relates directly to the price of an asset.

[guru_max]

Originally Posted by bluevolt

I agree. I also recall you strongly recommended to stay away from auto sector stocks in the other thread.

I used to love read economic times especially the weekly ET wealth magazine, now whenever I read it with 'Analysts' recommending to continue SIP even in the current bloodbath in stock market I feel like tearing away the newspaper.

These are the 'Analysts' who recommended investments in the stocks that are suffering the most these days. They used to be their hot picks!

I have become irritated when I read 'Analysts' recommend this and that. Who are these 'Analysts' and from where they derive 'rule of thumb'!

It is very important lesson to learn in the current slowdown - never invest on the basis of some 'analyst' recommendations as most of them will be crap anyways and never believe statements like 'the rule of thumb says, save xyz amount, invest in equities using 100-age ratio'.

The actual rule of thumb is to use your own wit when managing personal finance and make decisions not on basis of any one else's recommendations.

Anyone who invests for a long term (10+ years) in mutual funds should stick to the SIPs like a superstition. IF you stop your SIPs during the bear phase, you will never buy the funds at low NAVs thus massively impacting your final returns. The low price during bear phase plus the power of compounding is not to be missed. SIPs are the opposite of timing the market. Hardly a few can time the market properly and it is extremely difficult to beat dollar cost average.

[FrodoOfTheShire]

Originally Posted by poloman

Averaging may not work always atleast in direct investing. It may be somewhat safe in mutual funds. But still you should know what you are doing. Blindly following so called experts may end up in huge capital erosion. Many might have read this article from Zerodha CEO on the perils of averaging taking the case of yes bank as an example. This clearly shows the psyche of retail investors and should be an eye opener for everyone.
https://zerodha.com/z-connect/trader...ng-on-yes-bank

From the article it seems to me like Mr. Kamath is talking mainly about "trading" and not "investment", he has used the word "trader" everywhere in the article. He also talks about going with Technical Analysis rather than Fundamental Analysis for buying stocks. As far as I know, "trading" and "investing" are 2 distinctly separate terms when it comes to stock market and Technical Analysis is usually favoured by traders whereas Fundamental Analysis is favoured by long term investors. I may be wrong here and would be happy to be corrected.

So IMO, what Mr.Kamath is saying maybe true for stock traders but not necessarily hold true for long term mutual funds investment.

[poloman]

Originally Posted by FrodoOfTheShire

So IMO, what Mr.Kamath is saying maybe true for stock traders but not necessarily hold true for long term mutual funds investment.

I think any one buying a share with a target of more than 3 years can be termed an investor. The moot point is whether these stocks will recover any time soon. The article is clearly talking about FOMO ( Fear of missing out) syndrome and the disposition effect among retail investors. Many end up with penny stocks and huge capital losses in the process.

SIP is like a huge ponzi scheme for the MF houses. This keeps the money flowing and reduce the redemption pressure compared to lumpsum investments. So all the MF advisors and fund houses will advise to go for SIPs.

If any of us in the forum who started SIPs more than 10-15 years back can divulge the gains they made, it will be helpful.

[ranjitnair77]

Originally Posted by FrodoOfTheShire

He also talks about going with Technical Analysis rather than Fundamental Analysis for buying stocks.

What he was trying to say is that retail investors, who buy on fundamentals, should leverage some simple Technical Analysis strategies while averaging down to cut risk. He is not picking TA over FA.

That article was a great read.