Yes, we all know that the market has been going through a very rough patch in the recent past, and that stock prices have taken a beating. And we know that several players have lost their shirts in this battering. That’s because of what we’ll call opportunity loss, a loss that happens because people either leave the market fearing the worst, or stay away from investing waiting for better times. At times like this, the winners are the patient, long-term investors, who simply batten down and wait out the storm.
We have told you on more than one occasion to stay invested with an objective rather than be moved by market swings. The benefit of SIPs has been reiterated on several occasions. Historical evidence shows that the markets have climbed back from every trough, and scaled new highs.
The key is to start now and not wait for tomorrow. Take a look at the hypothetical case in the box below to know why you should be an all-season investor. Assuming you do invest at the right time, how long should you stay invested? The longer you stay invested in an equity fund, the better. The gains from staying invested in diversified equity-linked funds are more because these funds are exposed to a wider array of sectors in an economy, and it’s unlikely that they will all go wrong at the same time. The gains are consistent and smoother over the long term and there is no opportunity loss.
• If you had started a SIP of Rs 10,000 in Reliance Growth fund in January 2005.
• Till June 2008 you would have contributed Rs 4.2 lakh and owned 1,976 units.worth Rs 7 lakh.
• Alternatively, you could have entered fund in August 2006 when stock prices fell.
• You could have invested Rs 1.9 lakh in lump sum and started an SIP of Rs 10,000 a month.
• By June 2008 the investment would have grown to Rs 5.9 lakh. 1,670 units.
• Waiting to invest when the markets fall would have cost you Rs 1.1 lakh.
