Equity Investing: SIP option in mid-cap segment works best

For mutual fund investors, a long-term systematic investment plan (SIP) in the mid-cap segment is a good investment option as compared with the large-cap or small-cap segment. While an average large-cap stock is generally less volatile than an average small and mid-cap stock and provides stability to the portfolio, the small and mid-cap segments may offer many opportunities to investors for potential higher growth, a study by WhiteOak Capital Mutual Fund reveals.

On a 10-year monthly rolling return, while the median SIP return for Nifty 100 TRI is 12.5%, the return from Nifty Midcap 150 TRI is 16.5% and that of Nifty Smallcap 250 TRI 14.2%, data from the study show.

Timing does not matter much
There is no meaningful difference between the average return of different dates of investing. However, the best SIP date is the date when an investor usually gets his salary. In the long term, it does not matter if the investor invests through an SIP daily, weekly, or monthly. The study shows all the three frequencies generating similar returns. So, an individual should focus on investing a small amount regularly for the long-term.

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In volatile market conditions, the rupee cost averaging works best in SIP as investors get more units on the investments when the markets correct and lower units when the markets rise.An individual should stay invested ideally for more than five years which will take care of the various market cycles. Investing through an SIP is ideal for new investors who want to take minimum risk of investing in equities. Also, investing in index funds is the safest option when taking the SIP route as the expenses will be lower than an actively managed fund and the SIP returns will mirror the index returns.

Growing popularity of SIPs
SIP contribution touched Rs 12,976 crore in September, the highest ever, data from Association of Mutual Funds in India show. Monthly SIP contribution grew from Rs 3,698 crore in September 2016 to Rs 8,263 crore in September 2019 to Rs 10,351 crore in September 2021 and now at Rs 12,976 crore. The number of outstanding SIP accounts in the month stand at 5.83 crore, indicating disciplined investment mode by small investors.