Is this a question that has been uppermost in your minds?

I have been saying ‘do a good SIP in a good fund and go to sleep’ – and I have been blunt enough to say which funds too. Now is this applicable to all the people who read this blog? No. Of course not.

People who have stock picking skills (or who think they have stock picking skills) surely do not need to do SIP. Do I expect a Portfolio Manager or an active fund manager to need this advice? I doubt it. I have a few friends who are CXOs who are happy doing a SIP. At last count there were at least 6 CEOs, 12 COOs, 5-6 CIOs, …who I know are doing SIPs.

I also know it is easy to pick up a period in time and say ‘If you had stopped the SIP in this period you could have saved so much’. I was in the market when there was no index, when the index was at 100, at 2000, at 4000, and at 21000.

Imagine a person who had entered at 3000, and at 6000 said ‘it is too high I will not invest till it comes down to 3000’..he would still be waiting. Seriously we all have 20/20 hindsight.

The reason why we all do SIPs is simple. To keep the brain out of investing. http://www.subramoney.com/2011/09/your-brain-is-your-investment-enemy/

Also there are sometimes when out of sheer laziness you miss 2-3 installments by not going to the bank to make the investment. IN case of a SIP you avoid such mistakes.

If you had started a SIP when the index was at 2000, then watched it go to 21000 and then go down to 9000 and now at 16700….believe me you would have made a lot of money. Now intelligently if I said…when the index reached 19000 (the p/e was too high theory) if you had stopped the SIP and started it again at 17000 (on the way down) YOU COULD HAVE GOT AN EXTRA 4% p.a EXTRA. Sadly this is hindsight.

I do SIPs no doubt, but I am largely I am an direct equities guy. To do direct equities you surely need :

a) a large ability to wait. Like a croc waiting for 6 hrs for its prey.

b) a decent big picture vision. Like an eagle, you need the big picture.

c) a good hang of the numbers – helps to be a CA and have a suspicious mind.

d) training as a lawyer. Reading the directors report with a lot of suspicion..and reading between the lines

e) experience. It cannot be taught.

f) friends in the business. On my dial pad are a lot of useful people whose distilled experience would run into 7-800 years experience.

g) ability to run screens – as well ask a tech query to a fundamental guy just to check the worth of doing the transactions.

h) discipline to make rules for transactions over an X amount (say Rs. 10L) and the skill to do tactical changes for smaller transaction say Rs. 2 L.

i) ability to break rules – and know why you are breaking them.

j) cut losses on trading positions and build positions on investment items when the chips are down.

k) having friends who will skin you alive for your mistakes, show you the mirror, and show you the difference between skill and luck.

l) having a great broker (God does not make them anymore)

m) a good hang of the compliance, law, etc. – useful, if not critical.

n) ability to speak to 3-4 people b4 doing a big transaction….

…..

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  1. Thank U for the Input.It gives us Take away….If We are an ordinary guy next door with a moderate income…we will be much much better off ,trusting Naren ,Prashant,Approva than to Invest on Tip of an office collegue or Pink Paper.LIke we give RS 101/501/1001 to Pundit for performing Pooja….we should give 2.95 to MF Manager and concentrate on Prolonging our carrear in corporate circus…..If we have chosen our Team well ,We may have a rainbow later in life .Many thx for constantly reinforcing this in your readers mind

  2. For youngsters this is helpful. They can stop direct investing without research. Instead they can give 2% or 3% to MF and do a couple of SIPs and dig their career further.

  3. proposing another point for direct equity investing:
    o) One should also have the time and ability to read and learn various things about investing over a period of time. Since, knowledge and experience doesn’t come in ready to eat package. Sab samaan leke, fir pakana padta hai !!

    Things that one can learn while doing direct equity investing can also help a great deal in professional life as well, is my experience of past few years.

  4. For the last 5 years going by 50/50 Equity/Debt rule, I am investing equal amounts in SIP of HDFC TOP 200 and Bank Recurring Deposit.

    Both of them seem on par. For the moment, am more comfortable with SIP-RD than SIP-Equity. The market seem never right whenever you want to withdraw.

  5. Subraji,

    Thanks for the input. A friend of mine refered your blog to me and I have been following your writing for the past one week. Being a young professional (Chartered Accountant),I’ am sure your advises and expertise will help me shape up my finances better.

    Thanks!

  6. Agreed that one should continue SIPs over long periods of 15-20 years.
    But one can also boost returns by regularly investing additional sums when markets are trading at lower PE multiples.
    We did an analysis of putting ‘SIP on Steroids’ and have documented the ‘encouraging’ results on our website stableinvestor.com

  7. Dear Sir,

    I am a new candidate in the mutual fund class. I read your blogs and many thanks for providing such the valuable information.

    Sir, could you please help me to find out the perfect fund for me. I want to invest 2 sips 1000 each for 10 yrs and 15 yrs period. But i don’t want to take much risk with my capital.

    Please suggest.

    Regards,
    Sameer

  8. I get a little circumspect when about everybody is recommending SIP today – same as ULIPs earlier . Can you please list the disadvantages of SIP ? What happens if I dont want to buy for a month/few months ? Can I pause the SIP ? Personally , I dont like the idea of setting a regular ECS mandate with different funds.

  9. Hello Sir,

    So the SIP money you put every month directly into equities do you invest every month or you keep it and then try to time a little bit for entry.

    Regards
    Gourav

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