MF buying – Second chance in a month

Over the last two months I have written enough blog posts advocating a different method of buying MF. Most people who have understood my message have agreed to the basic plan. However, even with a fairly robust method of looking at index levels and their DMA, many have wondered as to what will be the exact time of the first purchase. Giving a buy or a sell call in the markets is hazardous because you may so easily be proved wrong – yet, I will start buying MF this week for large caps.

Am I saying that I am convinced of the market not falling any further? Not at all – in fact I think that there is a good possibility of the markets getting to even lower levels than today by late January, if the quarterly results are once again not meeting the expectations. The important point is to note that in my method I will buy MF 4-6 times in a year. If I had some magic wand through which I would be able to predict the day when Nifty will be the lowest in 2016, I would buy my large cap MF units only on that day. In reality, despite studying fundamentals and market movements I do not know that date. So the question is this – if there are 4-6 different time instances where we should buy then is this one of those? 

Posing the question in this fashion will obviously have a positive answer. Why do I say so? Think of it like this – not too long back Nifty was at 8400 plus and it has come down by more than 10 % in less than 3 months. Also, today it has fallen so much that it is quite possible to have a bounce back immediately. I do think over the next 2-3 days there will be more cuts after the bounce and Nifty will probably go to 7600 or so. Remember, it had found support at 7500 plus levels last time and there is every possibility that 7600 levels will still find a very good support. While it may yet surprise us and go below 7500, I do not think that will be the case.

OK, enough of discussions on this now. I will do the following:-

  • Buy 20000 Rs worth Large cap, Diversified Equity and multi-cap funds this week after seeing the next couple of days.
  • Buy 20000 Rs worth of US International fund based on the US market’s reaction to the Chinese and European situation.
  • I will not buy mid cap and small cap funds now as I believe there is a lot of possibility of these indices hurtling downwards in the next 2-3 months or so.

What should you do? Well, you can always continue your SIP while watching the real buying opportunities slip away. Or you can put your next 3-4 months money now.

Your money your choice – be sure you are doing the right thing.

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2 thoughts on “MF buying – Second chance in a month

  1. Have a wish list of scripts you would like to own with your preferred entry price and enter VTC (valid till cancelled) orders. If you did, you could have bought Kaveri Seeds, Cadilla @ 320 last week. Many others like Sun Pharma, Dr Reddys, L&T, Infosys, TCS, Tata Motors, ICICI, SBI are all at tempting prices now.

    With huge & continuing inflow into MFs during 2015, expect them to perform less efficiently. Be your own Fund Manager! Have a great 2016.

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  2. I do agree with your philosophy that the SIP may not be the most efficient way to invest. However, there are other considerations also:
    a) If you wait for the market to fall, the years may pass as you continue to wait as we don’t know when the market will tank. It is quite possible that your holdings will not grow with time due to the wait and watch strategy.
    b) A drop of 100 points in the NIFTY may lead to only a drop of 1 to 5% in NAV of a particular fund and this difference in NAV would be inconsequential if you have a ten year time horizon.
    What I think is to have a flexible approach based on availability of funds, market levels as well as a compulsory investement of a predefined amount at the end of every calendar year. This could be three or four or even one lumpsum investment.

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