SIP returns: Does date play a role?
Markets are volatile and are down by more than 20 per cent from their recent peak. It’s strange that many investors try to time the market despite knowing the fact that it is next to impossible. Nobody has done it on a consistent basis. In the case of lump-sum investment, luck may help investors sometime and they may also get the benefit of timing. However, in case of a systematic investment plan (SIP), even the luck does not help investors.
To check if luck plays an important role while investing through the SIP route, we studied investment in a fund with different SIP dates. For this, we took ‘Axis Bluechip Fund-Regular Plan-Growth’ along with, different dates of investment that is 1, 5, 10, 15, 20 and 25 of every month. It means that your account is debited on these dates and you get net asset value (NAV) prevailing on these dates.
After selecting different dates of a month, we took three different periods of your SIP tenure. We assumed that an investor has invested for three, five and seven years. After this, we calculated the annualised returns generated by these investments.
The following table gives the detail of investment and returns sorted on the basis of XIRR:
|
Tenure (Years)
|
SIP Date
|
Average Nav (Rs)
|
Units
|
Terms
|
Amt Invested (Rs)
|
Investment Value
|
XIRR (per cent)
|
|
7
|
5
|
19.87
|
21133.16
|
84
|
420000
|
518185
|
5.914
|
|
7
|
10
|
19.90
|
21110.18
|
84
|
420000
|
517621.7
|
5.906
|
|
7
|
15
|
19.92
|
21089.39
|
84
|
420000
|
517111.7
|
5.9
|
|
7
|
25
|
19.95
|
21052.24
|
84
|
420000
|
516200.8
|
5.895
|
|
7
|
20
|
19.98
|
21020.95
|
84
|
420000
|
515433.6
|
5.83
|
|
7
|
1
|
20.08
|
20911.79
|
84
|
420000
|
512757
|
5.732
|
|
Tenure (years)
|
SIP Date
|
Average Nav (Rs)
|
Units
|
Terms
|
Amt Invested (Rs)
|
Investment Value
|
XIRR (per cent)
|
|
5
|
25
|
22.96
|
13063.76
|
60
|
300000
|
320323.3
|
2.645
|
|
5
|
15
|
22.98
|
13052.18
|
60
|
300000
|
320039.5
|
2.581
|
|
5
|
10
|
22.98
|
13054.63
|
60
|
300000
|
320099.6
|
2.575
|
|
5
|
5
|
22.99
|
13051.63
|
60
|
300000
|
320025.9
|
2.552
|
|
5
|
20
|
23.02
|
13030.45
|
60
|
300000
|
319506.7
|
2.528
|
|
5
|
1
|
23.13
|
12969.98
|
60
|
300000
|
318024
|
2.371
|
|
Tenure (years)
|
SIP Date
|
Average Nav (Rs)
|
Units
|
Terms
|
Amt Invested (Rs)
|
Investment Value
|
XIRR (per cent)
|
|
3
|
5
|
26.52
|
6788.231
|
36
|
180000
|
166447.4
|
-5.025
|
|
3
|
10
|
26.56
|
6775.861
|
36
|
180000
|
166144.1
|
-5.187
|
|
3
|
15
|
26.63
|
6760.147
|
36
|
180000
|
165758.8
|
-5.383
|
|
3
|
20
|
26.62
|
6761.488
|
36
|
180000
|
165791.7
|
-5.42
|
|
3
|
25
|
26.63
|
6758.31
|
36
|
180000
|
165713.8
|
-5.501
|
|
3
|
1
|
26.75
|
6728.528
|
36
|
180000
|
164983.5
|
-5.86
|
The above table clearly shows that there is no single date on which even if you make an investment, there is a guarantee that you will yield better returns. For example, in our study, we have found that in the seven-year period, an investment made on the fifth of every month generated the best return. Nevertheless, in case of five-year tenure of SIP, the investment made on the twenty-fifth of every month generated the best return.
What is consistent in all the three periods of our study is that the investment made at the beginning of the month generated the worst return. Nevertheless, the difference between the best and worst return gets lower as you increase the SIP tenure. For example, in seven-year SIP tenure, the difference in returns between the best and worst SIP date is 0.182 per cent, however, in the case of a three-year period, it is 0.835 per cent.
Therefore, this study shows that you can fix your SIP date as per your own convenience and on the basis of cash flow, as dates do not matter much.