Key Points
- SIP investments at market peaks can generate substantial long-term wealth
This finding challenges the common belief that investing at market lows leads to better financial gains.
A report by ValueMetrics analysed historical data of the Nifty Smallcap 250 Index over the last 20 years, focusing on market cycles where the index fell by more than 15 per cent.
It compared two types of investors -- one who begins SIPs at market peaks and another who waits for a downturn before starting investments.
Surprisingly, the analysis showed that those who invested at the peak often built more absolute wealth over time, even though investors who started at the bottom saw slightly higher percentage returns.
For example, an investor who started a monthly SIP of Rs 10,000 in January 2008, just before a 76 per cent market crash, would have invested Rs 20.7 lakh by March 2025 and accumulated Rs 91.5 lakh.
This was achieved at an extended internal rate of return (XIRR) of 15.6 per cent, the report said.
In contrast, an investor who waited for the market to bottom out and started investing in March 2009 would have invested Rs 19.2 lakh and ended up with Rs 78.3 lakh, despite having a slightly higher XIRR of 15.9 per cent.
The report comes at a time when there is an ongoing debate about investing via SIPs during market volatility.
According to ValueMetrics report, waiting for the perfect entry point can lead to missed opportunities, whereas consistent investments, even during market peaks, can create substantial wealth in the long run.
However, a recent report by the Association of Mutual Funds in India (AMFI) showed that SIPs saw a strong surge in the financial year 2024-25, with contributions reaching Rs 2,63,426 crore (April-February).
