Plan Rs 1 crore+ corpus through SIP? This financial advisor highlights a major flaw that could undermine your dream goals
SIPS invests regularly, but ignores market cycles
Shrivastava warned that SIPS distributed market entries equally, but that meant they also made investments during the overvalued phase. He said a thoughtful entry point is key to long-term gains, and relying solely on SIP can reduce profitability over time.
1. The entry point is crucial
Buying stocks after being undervalued increases the chances of good returns. Although SIPs benefit from the average cost of Rs., they also dilute their earnings by investing in expensive markets.
2. Maintain investment momentum
Once investing, investors need to stay in the market for a long enough time to benefit from rising prices. Shrivastava said SIPS helps maintain discipline, but it doesn’t always make the most of a powerful gathering unless it increases donations.
3. Exit policy is missing
He noted that most retail investors failed to book profits at the right time. When the market is overvalued, SIP has no built-in mechanism to exit, which can lead to missed opportunities or losses during correction.
4. Capital rotation is impossible
According to Shrivastava, real wealth creation involves transferring profits to better performing sectors or assets. SIP follows a static plan that prevents dynamic allocation.
Diet-only investors may face major market risks
Shrivastava added that SIPS alone provided no protection during a market crash like this in 2008 or 2020. He pointed out that Japan and China are markets, and despite the huge economy, the markets remain flat for several years.
Why market timing doesn’t work for most people
However, another financial adviser, Manoj Arora, rejected the idea of a timed market and said that investments without understanding the market cycles can be risky. He said many investors try to time the market – selling low and selling high – but due to emotional decisions, the opposite will eventually be made.
“Most retail investors will lose more money (looking for a good entry and exit). For them, creating and then maintaining a balanced portfolio will be the only way to ‘buy low and sell high prices’.”
Even professionals find it difficult to time the market because economic data, global development and investor sentiment are changing, Arora said. He warns that missing the best performing days in the market (many of which happen after a sharp drop) may reduce long-term gains.
A balanced portfolio may provide better results
Arora recommends that investors should focus on building a diversified portfolio in stocks, bonds, real estate and cash. This approach reduces the impact of volatility and encourages systematic investment.
He added that rebalancing – sales assets have risen and purchased those that do not – automatically implements the discipline of “low purchases and high sales prices”, something most investors can’t do on their own.
