Great outcomes come from Patience and Perseverance
SIPs are for the long term. Equity markets are volatile and SIPs perform best in volatile markets. Indian equity markets structurally go up in the long run. We all know these statements. In spite of the above facts investor returns often do not match the returns which are published in fund factsheets and marketing materials. WHY?
The above graph has segmented the SIP returns of DSP BlackRock Equity Opportunities Fund over different market cycles. A few interesting points to note:
- From May 2000 to May 2003, the DSP BlackRock Equity Opportunities remained flat; a SIP would have earned a CAGR of ~6.0% during the same period. Investors who were not comfortable with returns below fixed income for a period of 3 years may have stopped their SIPs.
- Investors who held their SIP investment from 2000 to 2003, when the markets were flat, earned 6.01% returns. The same investors who held their investment for just one year longer till 2004 when the markets started moving up, only 25% longer, were rewarded with a 46.91% return. Returns sky rocketed because units were purchased when the markets were flat and sold when markets started rising.
FLAT MARKETS ARE GOOD FOR ACCUMULATION
Now let’s look at a different market scenario where an investor experienced both bull and bear markets from June 2003 to end of 2010.
- Investors during the bull market from June 2003 to end of 2007 would have earned a SIP CAGR of 52.5%. Markets corrected sharply which prompted a lot of investors to redeem their investments. The same investor who started a SIP in June 2003 and panicked and sold during the market correction in March 2009 would have earned only 6.9%.
- If that same investor continued the SIP investment till the end of 2010, when the markets recovered, a 27.3% CAGR would have been earned.
“CORRECTIONS ACCHE HAI“
Where are the markets headed … up, down, sideways? Impossible to predict! However, whether the markets correct or remain flat, accumulate SIPs. We all like to buy valuable things at a cheap price, equities should not be an exception.
About the fund:
DSP BlackRock Equity Opportunities Fund – Large & Mid Cap Fund (An open ended equity scheme investing in both large cap and mid cap stocks)
The Open ended scheme is suitable for investors who are seeking*
- Long-term capital growth
- Investment in equity and equity-related securities predominantly of large and mid-cap companies
*Investors should consult their financial/tax advisors if in doubt about whether the product is suitable for them.
Source: DSP Blackrock Mutual Fund