Rewind 2022: Which SIP date accumulated more units in 2022?

Buy low, sell high is one of the key principles of equity investing. But equities are highly volatile in nature; predicting market highs and lows or trying to do market timing is a daunting task. In such scenario, systematic investment plan (SIP) stands as most powerful medium of investing in equities through mutual fund route.  At times when volatility test investor patience, SIP facilitate investor participation even during difficult times and avoids the need to do market timing. SIP instills a discipline wherein investor continue to take small steps by investing fixed amount in a mutual fund scheme at regular intervals. These intervals could be monthly, quarterly or weekly frequencies. Most importantly, SIP helps investor to accumulate more units when market fall and a smaller number of units when market rises. This concept is popularly known as rupee cost averaging. Through averaging cost during market volatility SIP reduces the overall cost of acquisition. 

While SIP offers multiple benefits investors often attempts to catch market bottoms and lows with it.  They spend lot of time in trying to analyze which date they should choose?  Whether it should be beginning, mid or end of the month which can help them to accumulate more units?

To answer this, we rewind the year 2022 and did some analysis.  Like for instance, in the heatmap we list down the percentage change of equity market benchmark – BSE Sensex on most common SIP dates such as 1^st, 7^th, 10^th, 20^th and 25^th we observed that market witnessed wide range of fluctuations every month on these dates.  Quite evident there is no ideal date when SIP would have given more units.

Further, if we split the sum of percentage returns of BSE Sensex in two parts: 1^st to 15^th date and 16^th to 31^st of every month in 2022 we found equal number of instances of market fall and rise and hence there was no major difference in the unit accumulation between these two phases.

Further as market fall investors accumulated more units and with the market rise investors received lesser units. Accordingly, analysis of the monthly returns of the BSE Sensex showed index recorded biggest fall in June 2022 and investors accumulated maximum number units on June 17, 2022 when the Sensex declined to lowest levels at 51,360 points. Conversely, when the market touched a record high of 63,284 points on December 1, 2022 investor accumulated least number of units in the year 2022. But even a seasoned investor can’t predict these market highs and lows. Also note, market performance varies across calendar year. Above analysis is only for the year 2022 investors need to evaluate the underlying market scenario, fund performance and their own risk-return profile before investing.  

Hence, the ideal SIP date would be when an investor gets salary credited in his or her account. The pay day varies across companies so each individual needs to decide accordingly. If the person is self-employed or running a business, he or she should choose a day when he is expected to receive money in his account.  So, investor set a date closer to one when the money is credited as it will ensure timely investment of money before any spending. 

For SIP to reap maximum benefits investor need not worry much about SIP date. The focus should be investing regularly over long term through systematic investing. This will ensure investor accumulating more units in the long term and appreciation in net asset value (NAV) ultimately generating more wealth. Choose a best date that suits your income profile and don’t hit that pause button on SIP unless you attain your financial goals.  Most importantly, don’t try to time the market with systematic investing. It’s a disciplined method of investing and avoid using it in a haphazard way.