SIPs invest regularly, but ignore market cycles
Shrivastava warned that SIPs average out market entries, but this means they also invest during overvalued phases. He said a thoughtful entry point is key to long-term gains, and simply relying on SIPs can reduce profitability over time.
1. Entry point is critical
Buying a stock when it is undervalued increases the chances of good returns. While SIPs benefit from rupee-cost averaging, they also dilute gains by investing in expensive markets.
2. Stay invested for momentum
Once invested, investors need to remain in the market long enough to benefit from rising prices. Shrivastava said SIPs help maintain discipline but don’t always take full advantage of strong rallies unless contributions are increased.
3. Exit strategy is missing
He noted that most retail investors fail to book profits at the right time. SIPs have no built-in mechanism to exit when markets are overvalued, which can lead to missed opportunities or losses during corrections.
4. Capital rotation is not possible
According to Shrivastava, true wealth creation involves moving profits into better-performing sectors or assets. SIPs follow a static plan, which prevents dynamic allocation.
SIP-only investors may face major market risks
Shrivastava added that relying only on SIPs offers no protection during market crashes like 2008 or 2020. He pointed to Japan and China as examples where markets stayed flat for years despite being large economies.
Why market timing doesn’t work for most
However, another financial advisor Manoj Arora rejected the idea of timing the market and said that investing without understanding market cycles can be risky. He said many investors try to time the market—buying low and selling high—but end up doing the opposite due to emotional decisions.
“Most retail investors will lose more money trying to time the market (finding a good entry and exit point). For them, creating and then maintaining a balanced portfolio will be the only way to ‘buy low and sell high’,” Arora wrote in his post on X.
Arora said even professionals find it difficult to time the market because economic data, global developments, and investor sentiment change constantly. He warned that missing the best-performing days in the market—many of which come after sharp declines—can reduce long-term returns.
A balanced portfolio may offer better results
Arora suggested that instead of timing the market, investors should focus on building a diversified portfolio across stocks, bonds, real estate, and cash. This approach reduces the impact of volatility and encourages systematic investing.
He added that rebalancing—selling assets that have gone up and buying those that haven’t—automatically enforces the discipline of “buying low and selling high,” something most investors fail to do on their own.
