My mutual fund investing strategy is anything but systematic. While I do know how much money I want to set aside each month for investing in mutual funds (across various financial goals), I don’t follow the common Systematic Investment Plan (SIP) strategy (I used to do that at one point in time by investing on a common date each month but not anymore). Rather, these days, I accumulate the cash each month against each financial goal and buy into respective mutual funds each time there is a 250-point dip in the market (for me, the SENSEX).
I don’t specifically recall how I settled on this “250-points strategy” but that’s become a habit now and it has served me quite well. Over the past few months, I’ve managed to buy-in at very low price points and I’m already seeing the results payoff. The 250-point dip doesn’t have to be on a single day. So, for example, if the SENSEX dips from 18,750 to 18,500 over a 3-day window, that’s good enough for me. Further, the dip has to happen by 2 pm (because the cut-off to get that day’s NAV is 2.30 pm) so that I can take a call on whether to invest or not. If I believe that the market would tank further the next day, I wait till 2 pm the next day.
A pretty unusual strategy (that’s why you read this blog right?) but if you have the time and inclination it’s worth executing. Buy units as cheaply as you possibly can and watch them go up.
What could be more fun?
On a similar line of thought, I happened to read this pretty useful note from Value Research (emphasis mine):
In India, the stock markets seem to have settled into a pessimistic mood. There are the occasional bright days, but in general bad news of all kind has created a miasma which doesn’t seem to be anywhere close to clearing. It’s just the kind of time when the whole idea of investing, specially investing in equity for the long term loses any urgency. You don’t get the feeling that you’ll be missing a bus by not starting fresh investments now. No great gains appear to be possible and therefore no great opportunity loss will take place if you don’t invest. So that equity SIP that you could have signed up for will probably go unstarted till you can feel some excitement of making money in your bones.
Unfortunately, for those who are saving and investing for the long-term, this would be downright dangerous frame of mind. This is exactly the kind of time in which you can lay the foundations of great long-term returns. Mainstream equities are stagnant, with frequent bursts of pessimism that drive prices down. An year or two of monthly equity SIPs in this supposedly uninspiring market and you would have built up a sizable chunk of equity holdings that have been acquired at a relatively low average cost.
For the thinking saver, these are actually very exciting times, the sort when you can quietly lay the foundation of your future fortune.
Couldn’t agree more. I’m slowly and steadily hiking up my equity exposure.