I have SIPs for all my mutual funds. However, I also buy additional units when the markets are down. Does this help? My understanding is that I get units at a cheaper price and hence, the unit number increases. Does the strategy work?
- Akshay
Well, it is very difficult to say whether this strategy works or not in the long term. There is so much randomness in the markets that you really can't say for the long term. Intuitively, one would say that if you are able to successfully time and buy cheaper, then that should help over the long term. But really you don't know whether you bought at low or not. It is all in hindsight. So, broadly to answer the question, I would say, it is still okay. You can continue doing that as long as you still commit a bulk of your money to the SIP mode of investments and deploy only a small portion of your money opportunistically, the way you described.
But even for that, I would suggest devising and following some rules for yourself. For instance, you would invest 'x' per cent of this opportunistic allocation at a 'y' per cent fall in the market. Once you follow such a methodical or a pragmatic approach, it should by and large work. The other important thing with this opportunistic buying is that if you hit some near-term success, then do not start investing a bulk of your money through this mode at the cost of SIPs. As long as you follow these rules, you should be fine.
