When it comes to investing, there are no certainties. Therefore, it is important to evaluate any dictum related to investing with facts and data. One such dictum, which generally escapes scrutiny is that systematic investment plans (SIPs) reduce the risk of investing in equities. This statement has been repeated so often that it has attained a hallowed status. A close examination of data, however, reveals that SIPs do not reduce the risk of investing in equities.
Since investing through SIPs is compared with the alternative of lump-sum investing, we have analysed the historical holding period returns for Sensex under both, going as far back as possible. The returns have been computed for time periods of 15 years, 10 years, five years and three years (see graph).
