This is Shaunak and today I am going to talk about one strategy for Stock SIP. This strategy is very boring yet powerful.
The strategy is very simple, I keep accumulating in my SIP stocks on the last day of every month if it is closing in red on monthly chart. It doesn’t matter how low it is, the only condition it should be closing in red between 3.15 to 3.29 pm.
Before starting investing in this strategy, I have done back testing in many stocks and here is the result of BSE Ltd. (From Jan 2018 to Dec 2023) The results are for reference only, it may vary from stock to stock. I’ve kept the SIP amount just 2K for better understanding.
Hi Shaunak welcome. While the thought and approach is interesting there are a few caveats to make note of
Generally markets and most stocks have been on an uptrend in the past 5 years so any SIP approach would have resulted in gains (as a general observation). A simple SIP at a specific date would have resulted in similar results
This is especially in the case of BSE (stock has been on a rocket)
Would be interesting to understand specific stocks where this approach didnt work out. Could you please share a few names Thanks
First of all thank you very much for your valuable feedback.
I completely agree that most of the good companies have performed very well in last 5 years, but if we test with last 10 years data also the results are very good.
Let’s take a very simple example of Reliance with 10 years time frame with 5,000 SIP amount.
From Jan 2014 to July 2024
Total Investment = 2,67,192
Holding Qty = 323
Average Price = 827.22
LTP = 2927
Current Value = 9,45,421
P&L = 6,78,229
(253.84% and CAGR is 13.47%)
I have tested this strategy with many stocks with different time frame and in most of the stocks CAGR is greater than 13% and worst is 10-12%.
(Dividends and bonuses are not calculated.)
The back test result list is very huge so it is difficult to share it all at once, I will try to share individual stock performance in last 5 years and 10 years.
Small and midcap funds will also beat this strategy with SIP. Some large cap funds will also deliver good results. Only if overall cagr is above 20 of this stategy then you can consider this.
You can also take etf funds for this and compare when market fall on any day and you buy it and check its cagr.
If we see the trend in this back test, it is averaging down from Jan 2018 to March 2020 (more than 2 years of bear mkt for this stock). One needs high conviction and patience for this strategy to work. It’s easy to invest based on hindsight information, real time may not be that easy. Just my 2 cents.
100% agree with you, that’s why I called it a boring strategy, because most of the people stop it after one year and if you see the records, you will find that we have to continue it for at least 3-5 years.
I’m planning to share my Stock SIP Portfolio every month which will give more insight.
In my personal experience better to go with Index fund or ETF instead doing Stock SIP in stocks like Kotak or HDFC bank. This setup work best with growing industries.
happy to share one example of growing industries: APL Apollo
Now if we check March-2018 Sales, it is all time high and PAT is also all time high compare to last 5 years.
How many stocks did you backtest? Backtest period is 5 years or 10 years? Members of this forum use different tools or own code to backtest, what did you use? What is the win and loss %? How many stocks succeeded, how many failed the test? What was the stock universe, Nifty 500? Did any stocks that you have done SIP resulted in negative results?
We have been in a big bull run for more than 4 years, so many stocks, even if bought with lump sum would have resulted in good profits.
I am simply using Trading view & screener to get the data and have one paid EOD software called KeyStocks.
Lowest 5 years CAGR 10-12%
Failure in my definition is giving a return less than 12% over a period of 5 years and if we check even Nifty Bess CAGR is 13.62%
Stock Universe : Nifty 500
Ok, so now let’s come to a very common question which I get regularly that in last 4-5 years many stocks are performing very well but if we go back to 2018, nobody knew that Covid will come and after that there can be such a boom in the market, Similarly, today we do not know what will happen in next 5 years.
Yes sir there is no doubt that HDFC Bank is far bigger than APL Apollo in every aspect.
I have a different preference for companies like HDFC Bank, Reliance, TCS, ITC, LT etc. they will be included in my long term portfolio but not in stock SIP.
I first did back testing of the stocks which were in my portfolio at the initial stage of my stock market journey (2017-18). Like Reliance, Tech Mahindra, UTI AMC, Voltas, Ashok Leyland, BSE, LT etc. Later I backtested most of the ETFs and then Nifty 50 and Nifty 150.
