{"id":24250,"date":"2022-07-05T12:31:00","date_gmt":"2022-07-05T07:01:00","guid":{"rendered":"https:\/\/fundsindia.com\/blog\/?p=24250"},"modified":"2024-05-09T12:44:28","modified_gmt":"2024-05-09T07:14:28","slug":"everyone-says-invest-in-equity-sips-for-the-long-term-but-how-long-is-long-term","status":"publish","type":"post","link":"https:\/\/www.fundsindia.com\/blog\/mf-research\/everyone-says-invest-in-equity-sips-for-the-long-term-but-how-long-is-long-term\/24250","title":{"rendered":"Everyone Says Invest in Equity SIPs for the Long Term. But How Long is “Long-Term”?"},"content":{"rendered":"\n
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This article was originally published in<\/span> Financial Express. Click\u00a0<\/span>here<\/span><\/a>\u00a0to read it<\/span><\/em>.<\/p>\n\n\n\n

We have all heard that it\u2019s important to have a long-time horizon when investing in equity markets via SIPs.

But have you ever wondered how long is ideally \u2018long term\u2019 when it comes to investing in Equity via SIPs?
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Don\u2019t worry, we\u2019ve got you covered here. <\/p>\n\n\n\n

Let\u2019s put different time frames to test\u2026<\/span><\/strong><\/h3>\n\n\n\n

Let us evaluate SIP returns of Nifty 50 TRI over different time frames. For this, we have considered different SIP journeys starting at the beginning of each and every month from Jul-99. So the series would look for SIP journeys beginning on 01-Jul-99, 01-Aug-99, 01-Sep-99, and so on up to the present. <\/p>\n\n\n\n


1 Year Time Frame<\/strong><\/h4>\n\n\n\n

Over a 1-year time frame, there were 66 occurrences (out of 262 occurrences) where the SIP portfolio ended up making negative returns. In other words, 25% of the time which is 1 out of 4 times your Equity SIP made negative returns over a 1-year time frame. <\/strong><\/p>\n\n\n\n

Verdict: 1 Year is too short a time frame and definitely not suitable for Equity SIP investing.<\/span>\u00a0<\/strong>\u00a0<\/p>\n\n\n\n

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<\/p>\n\n\n\n

3 Year Time Frame<\/strong><\/h4>\n\n\n\n

When we extend the time frame to 3 years, the occurrences of negative returns are reduced from 25% to 11%. While this is definitely an improvement over 1 Year time frame, negative returns for 11% of the time are still a concern.<\/p>\n\n\n\n

Verdict: 3 Year Time Frame is also not suitable for Equity SIP investing<\/span><\/strong><\/p>\n\n\n\n

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5 Year Time Frame<\/strong><\/h4>\n\n\n\n

Let us now extend the time frame to 5 years. Unlike 1 and 3-year time frames, the number of negative occurrences has drastically dropped. Out of a total of 214 occurrences, there was only 1 occurrence<\/strong> where the returns were negative!

By extending the time frame to 5 years we,<\/p>\n\n\n\n