Are SIPs ineffective?

Since January 2009, Stock markets have depreciated almost 60%. According to the old theory, SIP should give profits in the long run.

But if we run the real numbers than if someone has started investing in mutual funds via SIP 5 years back at the Sensex 5000 than also today at the level of 9000 to 11000, their Net worth will be 10% Down.

And if someone has invested a Lump-sum amount in the stock market 5 years back at the Sensex level of 5000 than today it would be doubled.

But this type of scenario is impossible because it is quite impossible that, someone has invested in the equity 5 years back and after that he/she has not invested a single rupee after that….!!

So Are SIPs really ineffective in the current Recession? Is Old theory of Rupee-Cost Averaging no longer effective?

Well, I don’t think so. I think SIPs are still effective. The main purpose of SIP is ‘To buy more when the market is low & Buy Less when the Market is High’.

In real life, because of emotions we do exactly the Reverse. Means we buy more when the Market is Up & we buy less when the market is low. SIP is for to eliminate this Emotional bias.

Basically SIP will only work in the long run if you continue investing in both the up & down markets. What most of the people do is, they do SIP in up market & discontinue it in the down market.

This should not be done. If you have started your SIP in the Up market than please continue it in the Down market as well. Than and only it will work. Otherwise it won’t work for you.

Believe me….SIPs are the still most effective way to beat the market in the Long run. So Continue your SIP in the Current market also….!!!!!!!!!