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Here is this month's screener data of how consistent a fund has performed with respect to a category benchmark over every possible 3-year, 5-year and 7-year investment duration since 3rd April 2006. All equity funds and equity-oriented balanced funds (excluding equity savings funds) have been considered*.

The method adopted is based on this report:  A simple way to measure mutual fund performance consistency. Screener data for October 2016 can be found here.

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4

In the second part of the buying "low" vs buying "high" study, I consider return differences for identical investment amounts. And guess what? The results are most surprising!

For those who have not read the first part, I request that you head over to Equity: Buying “High” vs Buying “Low” and then come back.

Some definitions:

1 Buying low (low-SIP): Buying when index (S&P 500 and Nifty total returns indices) has a value lower than its ten-month average. This is checked only once a month - on the first.

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7

Suppose you invested in a stock market index only when it was "high" and compared the return obtained with that from an investment made only when the index was "low", how much do you think the returns would vary? How would these returns compare with an investment made regardless of index levels? Let us find out.

In real-time, market highs and lows cannot be determined. Therefore, it is common practice to compare the current value of the index with the average value of the last 100 days, 200 days, 365 days, 10 months etc. This is known as trend following. The average reduces the daily noise in the index values and provides a "trend'. Here are some examples: Nifty Valuation Charts Nov 2016: PE, PE, Div Yield, ROE, EPS Growth and a tool to calculate: Nifty Valuation Analyzer: PE, PE, Div Yield, ROE, EPS Growth Rate.

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1

“Blessed is he who expects nothing, for he shall never be disappointed", said British poet Alexander Pope. This applies to investing as well. Low return expectation is the key to minimising effort associated with money management. I have published a series of post on 'what' and 'how' to expect when you are expecting .. er returns. I thought it might be worth collecting them all together. Do have a look and let me know what you think.

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3

I am not a mutual fund salesmen. Therefore I have no problem in pointing out that a mutual fund SIP, in particular in an equity mutual fund  does not reduce the risk associated with the equity market in any way. All a SIP does is buy units at different market levels. Some high, some low. No matter when you buy, the corpus accumulated is exposed to the full volatility of the market. If it crashes, then when you purchases those units (even if you did not do a SIP) will not matter.

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