I don’t want to start a MF SIP now as experts claim markets will crash: Am I right?

Published: September 2, 2021 at 10:14 am

Last Updated on September 2, 2021 at 10:14 am

In this article, let us address a question received on our Youtube Channel and a question on many investors’ minds: “I’m planning to start my equity investment now (at the age of 26). Now the market seems to be at an all-time high, and most experts are commenting that there will definitely be a crash. This makes me reluctant to start my investment in an index fund (in SIP especially).”

“Any thoughts on this will really help! Can we follow some strategy for SIP Investment to mitigate this (something like increasing the SIP investment value on dips)? I understand that this makes this passive investment to be active, but “money deserves respect”, so I’m ready to spend a couple of hours a month to make this decision?”

First of all,  since you have taken my refrain “our money deserves respect (even if we don’t)” to heart, you should immediately stop following, listening, reading about what these experts say on the media.

What HDFC MF supremo Prashant Jain said a while ago is apt here (with some paraphrasing): We should never forget that we need two parties to survive in the market. Someone to sell when we want to buy and someone to buy when we want to sell. So there will always be two extreme views on the same security simultaneously: It is a good buy, and it is a good sell.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥

Similarly, on any given day, regardless of the market level, there will be someone who says the bull run is going to end soon and someone who says the bull run has a lot more steam left in it. We will never know who is right in real-time before we invest. We would know only in hindsight. 

Like I mentioned recently – Why should I invest in equity mutual funds when there is no guarantee of returns? – you cannot expect to participate in the stock market by waiting for the time to invest. It does not exist. This would be like a boxer waiting for the right time to train so that he does not get hit.

We fear all-time highs because we fear regret. What if the market starts to fall after we invest? Experience has taught me this: the market is not falling because you have not started investing. It will fall after you start.

At age 26, you should be investing as much as possible each month in a portfolio of 50-60% equity. It would be a criminal waste of youth not to do so.  So please start your SIP today.

The second part of your question: Risk mitigation is important after you start investing in equity. However, buying more on dips has nothing to do with risk mitigation. It is a childish activity in the hope of making more money.

An open-minded backtest would reveal buying on dips does not result in higher returns or lower risk. It would not be an exaggeration to state that we have backtested the living daylights out of common timing methods. Here is a selection on dip buying:

The complete tactical asset allocation archive is also available.

It is quite easy to develop a market timing model (say, based on PE, PB, DMA, EMA etc.), but most of these reduce portfolio risk most of the time. Higher returns are pretty much a coin toss – sometimes they do and sometimes not (see archives).

There are momentum strategies (guaranteed higher risk; potential higher reward): (1) Is this a good time to buy gold? A tactical buying strategy for gold (2) This “buy high, sell low” market timing strategy surprisingly works! (3) Do not use SIPs for Small Cap Mutual Funds: Try this instead! (4) Can we get better returns by timing entry & exit from gilt mutual funds?

But no strategy will work all the time! The sequence of returns puzzle cannot be cracked in a fool-proof way. This is also true for systematic investing.

  • Systematic investing (incl goal-based investing) will not work all the time.
  • Tactical investing (to reduce risk or enhance reward) will not work all the time.
  • Dip buying will not work all the time.

Nothing will work all the time. You need to take a leap of faith, choose one method, jump in, and learn to swim in real-time. If something goes wrong (and it will), we must learn from our mistakes and move on.

Yes, we must respect our money, but we need to respect our time much more. So a simple goal-based approach with a proper asset allocation and pre-defined equity reduction plan or, in other words, systematic risk reduction coupled with systematic investing is the best way to respect my time and money optimally.

All this requires is 30 minutes a year of portfolio review and rebalancing. Sure, this (like any other strategy) has no guarantee of success, but it allows me the time and space to keep a cool head if course corrections are required.

At 26, I would suggest you optimise your money management by setting it in auto-pilot and optimise your time to increase your income. Those who wish to get started the right way can begin here: Basics of portfolio construction: A guide for beginners.

Do share this article with your friends using the buttons below.

🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
Follow Freefincal on Google News
Follow Freefincal on Google News
Subscribe to the freefincal Youtube Channel. Subscribe button courtesy: Vecteezy.
Subscribe to the freefincal Youtube Channel.
Follow freefincal on WhatsApp Channel
Follow freefincal on WhatsApp
Podcast: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! 
Listen to the Lets Get Rich with Pattu Podcast
Listen to the Let's Get Rich with Pattu Podcast
You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.
Lets Get RICH With PATTU podcast on YouTube
Let's Get RICH With PATTU podcast on YouTube.
🔥Now Watch Let's Get Rich With Pattu தமிழில் (in Tamil)! 🔥
  • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
  • Have a question? Subscribe to our newsletter using the form below.
  • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!

About The Author

Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course!  Increase your income by getting people to pay for your skills! More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both the boy and girl-version covers of "Chinchu Gets a superpower".
Most investor problems can be traced to a lack of informed decision-making. We made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So, in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it, as well as teaching him several key ideas of decision-making and money management, is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)