Cost of starting SIP late can be huge over long-term : WhiteOak Mutual Fund

The “Cost of Delay” of starting SIP late can be huge over the long term as the longer the market takes to reach the bottom, the higher the “Cost of Delay,” keeping all other things constant, according to a release by WhiteOak Mutual Fund.

According to the release, if someone would have started a monthly SIP of Rs 10,000 in BSE Sensex TRI during January 2008 (at the peak of market cycle six as per the above table), as of 31st December 2024, they would have invested Rs 20.4 Lakh and the current value of this investment would have been Rs 72.1 Lakh at an XIRR of 13.5%.

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Similarly, if somebody had started this SIP in March 2009 (at the bottom of market cycle six as per the above table), as of 31st December 2024, they would have invested Rs. 19.0 Lakh (Rs. 1.4 Lakh less than the earlier investor) and the current value of this investment would have been Rs. 61.7 Lakh (Rs. 10.5 Lakh less than earlier investor) at an XIRR of 13.6%.

It is interesting to note that while the % return is marginally higher for SIPs started at the bottom of the market cycle, the absolute gain in rupee term (Wealth Creation) is far higher for SIPs that began at the top, the release mentioned.

Even the marginal difference of % return goes away over the long-term, irrespective of whether you started at the top or bottom.

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It is impossible to consistently predict the exact top or bottom of a market cycle, therefore one can create and follow a valuation checklist whenever one deviates from their strategic asset allocation, which should help investors reduce portfolio-level volatility to some extent while participating in the equity market, the release said.

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Past performance is not a guarantee of any future returns. Index performance does not signify scheme performance.

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