# The best time to start investing is today

At the end of 2017, a friend of mine asked me if it was a good time to start investing given the markets were at a high. I advised him to start investing through the SIP route. A few months later, in mid 2018, I was talking to the same friend again. This time he asked a different question. The markets had been falling for a few months. So he wanted to know if it was a good time to start investing or he should wait for the markets to fall further.

People who are afraid of putting their money in the stock markets find a variety of excuses to delay their investments. No time seems like a good time to invest. However, delaying your investment hardly does any good for your corpus. In most cases you end up spending the money that’s lying in your bank account. But even if you don’t, does starting to invest late help you accumulate more money? Let’s look at some data to find out.

Suppose you had to choose between starting an SIP of Rs. 4,000 today for 5 years or an SIP of Rs. 5,000 one year from now for four years. In both cases, the SIP would end on the same date and in both cases you would have invested Rs. 2,40,000. You would think that in some cases, the 5-year SIP would do better whereas in other cases, the 4-year SIP would give you better results. So what does the data say?

We took a portfolio of 5 different funds* and ran SIPs in them starting at various points in time. One set of SIPs were run for 5 years and another for 4 years. Some SIPs started as early as mid-2007. Four year SIPs were started one year after the 5 year SIP, such that they would end on the same day. Collectively, we compared the results of over 2500 SIPs.

The following graph compares the values of the 5-year SIP with the 4-year SIP as on the last day of the SIP:

As you can see from the graph, the 5-year SIP always beats the 4-year SIP.

Not only this, to remove any fund selection bias, we also tried SIP in Nifty 500 index. The following graph shows the result:

We see the same result here as well, the 5-year SIP almost always beats the 4-year SIP.

In terms of numbers, the value of 5-year SIP in mutual fund portfolio beat the value of 4-year SIP 98.5% of the times. In the index, the 5-year SIP grew more on 96% of the occasions. The odds are overwhelmingly in favour of your funds giving you more return if you start early.

The data clearly shows that waiting to start your investments almost never pays off. Most of the time, you end up accumulating lesser units, which will grow to a smaller value. Essentially, delaying your SIPs, even if you make it up with a higher monthly amount, does not help. Staying invested longer matters more!

So to get ‘highest returns’, the best time to start investing is today.

If you are still worried about timing the market, you might want to look at our newly launched Fundsindia exclusive product Smart SIP. Smart SIP dynamically allocates your money between a debt and an equity fund based on market conditions. This helps you make the most of market volatility.

*The funds considered for the SIPs were:
– Aditya Birla Sun Life Equity
– DSP Equity Opportunities
– Franklin India Smaller Companies
– HDFC Mid-Cap Opportunities
– ICICI Prudential Bluechip

The funds named here have been taken only for illustration purpose and should not be considered as recommendations.