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A report released by DSP Mutual Fund titled Netra – Early Signals Through Charts reveals that investors can make create more wealth if they do SIPs for very long term compared to lumpsum investment.
While the research was done keeping in mind US markets, it is relevant for India markets too.
The research shows that the global equity markets have delivered 5% CAGR over the past 123 years before considering costs and taxes. During this period, while US markets has grown by 6.4%, India and China grew by 6.6% and 3.3%.
However, if an investor invested in US equities through a simple SIP, she might have yielded an inflation adjusted CAGR of 10% over the 123-year period. This means, a modest $100 investment could’ve turned into $11.8 million today. This also proves that dollar cost averaging indeed works to preserve purchasing power over time, says the report.
Let us look at the chart to know more:
