Increase Your Wealth Corpus with SIP plus Lumpsum Investing Strategy | Data Study | SIP vs Lumpsum

Which is better sip or

lumpsum

? It's a question I've been asked a lot and I think I've done a great job of disappointing people by saying that both are important and in fact I stand by that because let's look at it this way, a sip is a Proven Investment System and highly effective that guarantees the continuity of investments, softens the acquisition cost and we do not have to worry about synchronizing the markets. On the other hand, a global investment is more tactical in nature and analyzes short-term market fluctuations. The term rejects any sudden movement in the risk-reward equation.

Market cycles etc., to put it another way, sip

investing

provides stability to

wealth

creation while lump sum

investing

is like energy drivers. Point blank, both are necessary and in this video I will try to defend with some facts and numbers, now notice that I said try to make a case, this was not accidental because when I was looking for this video, although I saw a lot of theory about people supporting the Sip way plus global

wealth

creation, I didn't find much information about it, I actually didn't find any

data

about it, instead what I found were a lot of article videos and comparison tables about sip versus lumsum, which at least in my head is a non-c comparison and I'm sure most of you are already beyond that stage, in fact the inspiration for this video came from this quick tweet from Page, heavily labeled as a sip plus lump sum

strategy

as a combination powerful to generate wealth.

This statement two was not backed by numbers or an action plan, but I certainly aimed for a tactical buy-on-the-dip approach, which is what I will do in this video. Finally, I must warn you that some parts of this video may be a little confusing and other parts may be very confusing because I am trying to explain in words what is on a worksheet, which is not easy and therefore will I'll ask you to access the worksheet as well while watching this video to get a better idea of ​​the scenarios. Let's start right, so for our

study

I have used the Nifty50

data

I used Nifty indices. comom took the entire data dump from January 2007 to December 2023 and if you had made a simple monthly sip of Rs 10,000, during those 17 years you would have invested a little over 20 lakhs and built a carpus of 61.4 lakhs in a kager of 11.8%, which excludes dividends, so 11.8% is our base case.

Now remember what Pank said in his tweet, a global reversal every time there is a four or 5% correction. Honestly, this is not very clear because the post does not tell me if this 5% drop is occurring on a single day of a particular week or is coming from the all-time high level, etc., which means that this part is for us to define for this

study

and to keep it simple I have assumed only 50 nifty closing values ​​so I am ignoring the volatility within the month and secondly the correction should have happened during the closing value The following month, for example, the Nifty closed at 18758 points in November 2022, which was an all-time high at that time, the December close was 18105, a drop of 3.5%. which did not cross our 5% correction limit, then by January 2023 the index at 17662 was almost 2 and a half% below the previous month's close, so again this number was less than 5% and February closed at 17,300 points even lower, which was also less than 5%, so in the 3 months the drop did not exceed the 5% mark.

But when you look at it cumulatively, the nift corrected by 9.2% in that 3 month period, but I don't think we can do much about it. I mean, if we don't have some time frames and some assumptions, it would be almost impossible for us to build a system, so let's go with those two assumptions and see what happens now when I fill in the numbers on a worksheet and find what I found. is that in the last 17 years there were only 20 occasions in which a global investment could have been made, that is, the index had fallen 5% in a single month only 20 times in the last 17 years, six of those moments occurred in the year. 2008, while the rest dispersed sporadically and the last such occasion occurred in March 2020, when covid hit, so, as a

strategy

, it is not very practical, right.

I mean, sometimes you have to wait 1 year, 2 years, sometimes even 3 years, but only to close the cycle. In this particular simulation, if I had invested an additional lump sum of, say, Rs 50,000 every time there was a monthly correction of 5% or more, then 50 * 20 is Rs 10 lakh, so my total invested amount would have

increase

d to 30 lakh 4,000 rupees and my coppers. would have risen to over 1 CR, but the interesting thing here is that despite inserting some money during the Corrections, my annualized return remains at 11.8%. Honestly, I expected this number to go up to maybe 12 and 1.5 133%, if not for that.

Staying at 11.8 was a big surprise. I even connected with a couple of friends who are good at math or so I thought, but they were just as stumped as I was. Let's take a minute and examine it with a simpler example, shall we? Let's assume a regular mutual fund investment strategy and on the first day of every year for 4 years I invest Rs 10,000 at the prevailing NV, as you can see here the NV has been increasing steadily due to rising markets and from 1st January. 2024, my former IR stands at 18.82%. Now I will make a change and on January 1, 2020, instead of 10,000, let's say I invested Rs 1 lakh at a Nev of Rs 10, so my first instinct was that I would see a big jump. at the xir value 25 27 maybe 30%, but as happened to me before, the number barely moved and the resulting value was 18.89%, so in response I was even more aggressive changing 1 lakh to 10 Rel and still no could change. things now, the only reason I can think of as to why this happens is maybe because the older values, the January 2020 value, have a very low weight due to the discount feature and therefore changing that value even at 10 lakhs didn't make much difference and I think that's what happened in our original scenario too where the annualized return stayed at 11.8% but you know what I'm really not sure about so if any of You understand this part better about why the numbers don't move, then please. let me know in the comment box or if you want to send an email or excel sheet along with it use this email id ok regardless of xir number construction and sip plus lumsum strategy based on monthly dips of 5% clearly won.

It didn't work because the market hasn't presented me with enough opportunities to deploy a lump sum and since March 2020 there have been no trigger points. Another variation I tried is where I

increase

d the drop percentage to 15%, so it is more of a correction and the scenario is that a global reversal is made every time the Nifty goes down 15% from its all-time high. Unfortunately, the last 10 years would have generated only six investment opportunities in a couple of months in 2016 and four months in 20120, so clearly using a high percentage number was not working, so I tried a smaller number with a 2% monthly correction and as expected there were many more opportunities to invest, in fact just in the last 3 years, so in 2021, 22 and 2023 I found 12 opportunities in my study. where I could have invested a little more in lump sum mode, so just like our previous simulation, apart from the Rs 10,000 sip, I invested an additional Rs 50,000 as lump sum investment in those 12 months when nifty50 had fallen at least 2% the The resulting data shows a definite improvement in the figures with the annualized return jumping from 14.9% if you had taken a regular sip to 16.4% when using a sip plus lumson strategy, so it is an incremental 1.5% in returns, not a small number, but from 2021 to 23.

It was more of a rising market, to be doubly sure. I applied the same logic for two more years, from January 2018 to December 2009, 19 when markets were generally flat, what I discovered here was the same 1.5% spread showing a sip plus lump sum strategy. has more possibilities compared to a sip only approach but when I was doing all this excelling some problems arose like in my case I assumed an unlimited supply of global money which is practically not the case for example in 36 months, that is. From January 21 to December 2023 I simulated 12 global investments of Rs 50,000 each i.e.

Rs 6 lakh, while Sip investment during the same period was only Rs 3.6 lakh. This is clearly not realistic, so I added a second layer of limitation and assumed that there was only Rs 1 lakh lump sum available each year to invest now because an investor does not know how many lump sum investment opportunities would be available each year and in which month I imposed another condition that I could invest only Rs 50,000 in each. half of the year in the first global opportunity available, for example, let's say the first global opportunity which is a 2% drop in the index comes in the month of February, so I will go ahead and invest Rs 50,000 in that month, let's say now The next opportunity comes in May of the same year, but since I have that restriction once in every half of the year, I cannot invest in May, but if the opportunity appears in October, then I can invest and if the opportunity had not appeared. so those 50,000 remain unused.

I'm sure this part is getting confusing now and maybe now you and I can understand why there isn't much literature on this sip plus lump sum strategy and I think it's because this lump sum strategy can be played in hundreds of different ways you could have transferred the lump sum amount. I could have split it quarterly. I could have used a 3% drop, a 4% drop, or a 6% drop. The frequency could have been changed to weekly fortn. nightly or even daily movement of the index. Etc. Anyway, to keep it simple and implement at least one simulation, I settled for a lump sum insertion of Rs 50,000 at the first available opportunity every 6 months by applying this condition in our simulation for a period of three years. and to my surprise, I was able to deploy the lump sum of Rs 50,000 in each of the six semesters, giving me an analyzed return of 15.4%.

I also applied the simulation over the entire 17-year period and sure enough, a sip plus lump sum strategy could be applied. to improve my investment-wealth ratio, although I couldn't reflect that in the X number in my Excel spreadsheet, so any help in this regard would be really appreciated. Well, it was a lot of numbers, a lot of conditions, confusion, so to quickly recap. process number one set

your

sips preferably in the first or first week of every month secondly divide

your

money amounts into two or more parts like the 50/50 i made without rupees for each half of the year and then set to increase the condition for implement the lump sum again, this can be 2% to 5% or if you like moving averages then you can look at that as well, but have a system with a condition implemented, the fourth step is to set up alerts that are available in many selection portals and brokerage platforms and that is to implement the global Sip plus method on the respective activation dates.

I think what will really help here is if you try doing the simulation yourself in a worksheet because I think that will give you a deeper understanding of this method and once you've made some customizations, I think you'll start to see the benefits as well. of this approach. I hope and pray that I haven't confused you enough and if you find a better way of implementing a sip plus

lumpsum

strategy, please share it with me along with the assumptions and limitations of the data once again, thank you for your time, subscribe to my newsletter and see you very soon until then.