Your SIP is making money?

Thanks to the popularity of SIPs there is too much of nonsense written about SIPs. Please be careful about what you read about SIPs. There are many people who are complaining about their SIP being in loss. On May 4th when the index crossed 11,900 I did a small study. In an utopian world without asset management charges, transaction charges, loads, etc. if you had invested in an equity index fund you would already be in the money if you had done a 1 year SIP. Your 4 year sip would also be in the money by now. However your 2 year sip and 3 year sip would still be showing a loss. However if the index reaches 13000 your 2 year sip and 3 year sip also come into the money – means you would be making money. Thus if you have been doing a SIP for 1 year, 2 year, 3 year or 4 year sip the sensex reaching 21000 would generally be of academic interest rather than a financial interest.

SIP works because it removes emotions. So keep investing – if you had not stopped the sip of yours you would have surely got some units at 21k – but you would have also got at 8k. “I will invest when the market is at 8k” is a statement many people would have made. However at 8k they would have said “my dentist told me it will go to 4k next month” – thus for the so called market timers 21k and 8k were academic. For you it was an index level at which you got some units. If you wanted more you should have done more sip…that is all!

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