Continue on your path! Steer clear of repeatedly changing lanes in SIP, advises WhiteOak Capital Mutual Fund

Continue on your path! Steer clear of repeatedly changing lanes in SIP, advises WhiteOak Capital Mutual Fund

According to a WhiteOak Capital Mutual Fund research, investors should stick to the same index in a Systematic Investment Plan (SIP) and concentrate on long-term financial objectives rather than yearly moving to the best-performing index of the previous year.

According to WhiteOak Capital Mutual Fund, past performance is not a guarantee of future returns and may or may not be maintained.

According to a WhiteOak Capital Mutual Fund analysis, it is preferable to stick with the same index rather than yearly moving a Systematic Investment Plan (SIP) to the best-performing index from the prior year.

During the period of FY06 to FY24, the research compared continuous investment in one index with SIPs that move to the best-performing index of the previous year in order to analyze the return (XIRR) of SIPs.

According to the analysis, SIPs in the Small Cap Index and Mid Cap Index have done better overall over the last 19 years than those in the Large Cap Index (as of April 1, 2024). SIPs in the Small Cap and Mid Cap segments each outperformed six times throughout this time, whereas SIPs in the Large Cap section outperformed seven times.

Decisions made by investors were often based on the index's performance the year before. It did warn, however, that moving to a better-performing index each year and changing lanes does not always translate into improved investment performance.

According to the analysis, long-term investments made since FY06 in the same mid-cap or small-cap index had a greater XIRR than yearly transfers to the top-performing index of the prior year.

As of 1 April 2024, an investor who kept their SIP invested only in the Mid Cap Index without switching to the previous year's top-performing index would have made an XIRR of 18.1% compared to 15.5% if they had switched to the top-performing index on a yearly basis. The table shown here illustrates results when a single index is used instead of the one that has been changed annually over the previous nineteen fiscal years. 

The analysis also pointed out that a SIP begun in the Small Cap Index would have produced an XIRR of 16.0 percent (as of 1 April 2024) as opposed to 15.1 percent if modified yearly.

Furthermore, the average XIRR for investors who maintained their SIP in the Mid Cap Index during a 10-year period was 16.6%, compared to 14.5 percent for those who began their SIP in the Mid Cap Index then changed depending on the index that performed the best the year before. It also noted that the average XIRR for SIP maintained in the Small Cap Index is 14%, as opposed to 13.9 percent if shifted based on the index that performed the best the prior year.

Previous success is not a guarantee of future results and may or may not be maintained. The Study emphasized that index performance does not imply scheme performance.

According to a WhiteOak Capital Mutual Fund analysis, it is best to "stay on course" using SIPs rather than constantly changing lanes, which may be detrimental and frustrating. As a result, investors should concentrate on achieving their long-term financial objectives by sticking with SIP.

It should be noted that the figures shown are pre-tax and that the computations provided do not account for stamp duty, levies, or other similar expenses. Depending on the current tax legislation, investors may have to pay taxes on their capital gains. Any computations performed are simply estimates intended to help grasp a certain idea. Developing or putting into practice an investing plan should not be done with only these calculations/views, since they are insufficient. whether investors are unsure whether a product is right for them, they should speak with their financial advisors.