Hey guys, I am testing a custom strategy of buying the dip in mutual funds.
Whenever NAV is reducing by 1.5-2%, I’m placing an order on that day.
This is other than normal SIP on first trading day of every month. That is done irrespective of NAV.
I tested this for 10 years of NAV in HDFC mid cap, and some other long running mutual funds.
However, the (buy the dip + normal SIP) strategy is fetching lower or same XIRR than the strategy with only a normal SIP.
I’m not understanding the math behind this strategy getting a lower XIRR. Since everything is at time high now. if I have kept buying at dips for past 10 years, I should be making extra returns since it’s at an all time high and has never gone below the NAV I bought at.
Should I not be having a better XIRR than just normal SIP since I have extra units at lower NAV?
@Bhuvan , @anyone, Any idea why it is happening?
If this analysis is accurate then it is comforting to know that a normal SIP works just as well and I dont have to actively track the markets
Yes true, but I am not able to understand the math behind getting lower returns when you are buying the dip.
It’s been a while since I looked at this. But if I remember correctly, it’s very hard to beat a regular SIP. Also, even buying the DIP+regular SIP vs. regular SIP results in only marginal differences. The results are also sensitive to starting periods.
Yes true, even I’ve read the same. I was trying to add something to a regular sip, not trying to replace it.
Yeah I guess the problem here is over 10 years, XIRR is not changing by much due to so many investments. The difference is more significant for 3 year periods. The corpus is larger due to more investments too.
