{"id":19,"date":"2015-09-30T03:49:58","date_gmt":"2015-09-30T03:49:58","guid":{"rendered":"https:\/\/kuverablog.wordpress.com\/?p=15"},"modified":"2019-06-10T09:33:04","modified_gmt":"2019-06-10T09:33:04","slug":"sip-beats-trying-to-predict-market-bottoms","status":"publish","type":"post","link":"https:\/\/kuvera.in\/blog\/sip-beats-trying-to-predict-market-bottoms\/","title":{"rendered":"Should I wait for a downturn to invest?"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_40 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" area-label=\"ez-toc-toggle-icon-1\"><label for=\"item-69d81f5d201ba\" aria-label=\"Table of Content\"><span style=\"display: flex;align-items: center;width: 35px;height: 30px;justify-content: center;direction:ltr;\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/label><input  type=\"checkbox\" id=\"item-69d81f5d201ba\"><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/kuvera.in\/blog\/sip-beats-trying-to-predict-market-bottoms\/#The_best_time_to_invest_is_now_As_we_have_said_earlier_invest_frequently_and_with_discipline_A_SIP_helps_achieve_this_objective\" title=\"The best time to invest is now. As we have said earlier, invest frequently and with discipline. A SIP helps achieve this objective.\">The best time to invest is now. As we have said earlier, invest frequently and with discipline. A SIP helps achieve this objective.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/kuvera.in\/blog\/sip-beats-trying-to-predict-market-bottoms\/#Its_all_good_in_theory_but_what_does_it_mean_in_practice\" title=\"It\u2019s all good in theory, but what does it mean in practice:\">It\u2019s all good in theory, but what does it mean in practice:<\/a><\/li><\/ul><\/nav><\/div>\n<h4><span class=\"ez-toc-section\" id=\"The_best_time_to_invest_is_now_As_we_have_said_earlier_invest_frequently_and_with_discipline_A_SIP_helps_achieve_this_objective\"><\/span>The best time to invest is now. As we have said earlier, invest frequently and with <a href=\"\/001-start-investing-today-a-ka-the-power-of-compounding\/\" target=\"_blank\" rel=\"noopener noreferrer\">discipline<\/a>. A SIP helps achieve this objective.<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>Even though investing when stock market is down seems like sage advice it is hard to practice for two reasons. Predicting downturns is hard, and having the stomach to invest when the markets are down and everyone is scared is even harder.<\/p>\n<p>Rani is getting a haircut at a salon. Interested in spreading the power of <a href=\"\/001-start-investing-today-a-ka-the-power-of-compounding\/\" target=\"_blank\" rel=\"noopener noreferrer\">compounding<\/a> to everyone, she asks her hairdresser Sam if he invests. Sam says he does, but he is waiting for a downturn like 2008 to put his money to work.<\/p>\n<p>Rani is a big believer in investing every month (SIP), so she is a bit perplexed. She asks us if we can look into the data to see if it helps to wait.<\/p>\n<p>We go back to Nifty all the way back to Aug 1990. We assume Sam had the perfect foresight to time the market for the tech bubble (2000) and the subprime crisis (2008). So he put all of his money into the market during those market lows, else he just waited and kept his money in the bank earning 6% interest.<\/p>\n<p>Of course, the above is a very un-likely scenario for two reasons:<\/p>\n<ol>\n<li>It is very hard to predict market bottoms.<\/li>\n<li>At market lows, when everyone is predicting the end of the financial world, it is even harder to invest your money.<\/li>\n<\/ol>\n<p>Still, let us grant Sam the ability to time the market bottom and the fortitude and foresight to invest at that time. It\u2019s Rani (2,500\/ month SIP) vs Sam (invest only at market lows), who comes out ahead?<\/p>\n<p><img loading=\"lazy\" class=\"alignnone wp-image-20\" src=\"https:\/\/blog.kuvera.in\/wp-content\/uploads\/2015\/09\/003-jpg-300x178.png\" alt=\"In the long term SIP beats trying to predict market bottoms\" width=\"792\" height=\"470\" srcset=\"https:\/\/kuvera.in\/blog\/wp-content\/uploads\/2015\/09\/003-jpg-300x178.png 300w, https:\/\/kuvera.in\/blog\/wp-content\/uploads\/2015\/09\/003-jpg-768x457.png 768w, https:\/\/kuvera.in\/blog\/wp-content\/uploads\/2015\/09\/003-jpg.png 975w\" sizes=\"(max-width: 792px) 100vw, 792px\" \/><\/p>\n<p>That\u2019s close you might say. Not really!<\/p>\n<p>Rani is running a disciplined effort via a SIP, while Sam\u2019s returns depends on him timing the two worst drawdowns in recent history to the month. The competition was skewed heavily for Sam to win, but he still ended up doing slightly worse than Rani. Over the past 25years he had two days to invest on and if he missed that he wouldn\u2019t get the returns above. For a simple example, if Sam is only 6months late in timing the market bottom (i.e market bottomed on Nov 2008 but he invested in May 2009), his total wealth would be 36lacs vs 44lacs above. That\u2019s a 20% swing by just missing the market bottom by 6 months.<\/p>\n<h4><span class=\"ez-toc-section\" id=\"Its_all_good_in_theory_but_what_does_it_mean_in_practice\"><\/span>It\u2019s all good in theory, but what does it mean in practice:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<ol>\n<li>Don\u2019t wait for a market downturn. Over the past 25 years there have been only 2 big ones and it is very hard to identify and buy at the market bottom.<\/li>\n<li>If you invest regularly via a SIP, don\u2019t stop because the market is falling. Invest rain or shine. In the end, discipline is your strength and your best friend.<\/li>\n<li>Financial TV and press create a sense of urgency by highlighting and magnifying every move of the stock market. Unless you are a full time day trader, stay put for the long term.<\/li>\n<\/ol>\n<p>Visit <a href=\"http:\/\/www.kuvera.in\/\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">www.kuvera.in<\/a> to invest in &#8220;Direct Plans&#8221; of Mutual Funds and save BIG on commissions!!!<\/p>\n<p>If you like this post, share the love below..<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The best time to invest is now. As we have said earlier, invest frequently and with discipline. A SIP helps achieve this objective. Even though investing when stock market is down seems like sage advice it is hard to practice for two reasons. Predicting downturns is hard, and having the stomach to invest when the [&#8230;]<\/p>\n<p><a class=\"btn btn-secondary understrap-read-more-link\" href=\"https:\/\/kuvera.in\/blog\/sip-beats-trying-to-predict-market-bottoms\/\">Read More&#8230;<\/a><\/p>\n","protected":false},"author":2,"featured_media":20,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false},"categories":[91],"tags":[9,11,100,13,17,19],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Should I wait for a downturn to invest? - Kuvera<\/title>\n<meta name=\"description\" content=\"The best time to invest is now. As we have said earlier, invest frequently and with discipline. 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