Back10-month delay in mutual fund SIP due to covid, costs you 57% returns
Here's how much a delay in investing costsAnnualised return of 10-month SIP in the large cap index fund was 57.69%, Annualised gain in the mid cap fund during the same period was 51%.
PremiumInvestors who delayed their mutual fund SIPs or, stopped their SIPs in the last 10 months i.e, from a period between February this year till date, in fear of market uncertainty due to covid 19, have lost good great returns on their investments. This is an opportunity loss for investors who were impatient and could not bear the short term volatility in the equity market. SIP in equity mutual funds is a long term investment but you have to start investing without waiting for the right time. Also, you have to be brave to bear the short term volatility in equity investments to reach your long term goals uninterrupted.
An opportunity loss of 58% returns p.a.
We have calculated SIP returns in a large cap index fund and an average performing mid cap fund to gauge the returns lost by delaying or stopping SIP in the last 10 months. The SIP period chosen here is February 2020 to November 2020. Annualised return of 10-month SIP in the large cap index fund was 57.69%. The annualised gains in the mid cap fund during the same period were 51%. See the details below.
SIP in a large cap index fund
Monthly SIP Amount: ₹2,000
Total amount invested in the last 10 months : ₹20,000
Total worth of amount invested as on November 13: ₹24,180
Absolute gains: 20.9% (you did not invest complete amount in one go..!!)
SIP Return: 57.69%
SIP in an average performing mid cap fund
Monthly SIP Amount: ₹2,000
Total amount invested in the last 10 months : ₹20,000
Total worth of amount invested as on November 13: ₹23,735
Absolute gains: 18.7% (you did not invest complete amount in one go..!!)
SIP Return: 51%
Source: Value Research
Timing the market: March 2020 was the best time to start SIP
The benchmark index BSE Sensex lost 35% from the beginning of February to March 23, when the covid-induced national lockdown was announced by the Prime Minister.
The index since the lows of March has shot up by 68% to breach the all-time high levels.
If one had to time the market, Mid-March was infact the best period to start SIP or to invest lumpsum in good mutual funds, to gain the maximum during this wonderful recovery.
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