Buy on dips mutual fund strategy

[DWeeP]

Hi,

Just thinking about a new (for me!) mutual fund strategy which can be used instead of SIP:

Everytime - nifty goes down by 1% buy mf units worth rs. 1000.

Invest in mutual fund for long time - 5+ years.

Alternatively, an excel file can be prepared of major holdings of the fund you are interested in. And 1% rule may be applied to sum of change in % of these scripts.

Time: Most fundhouses/brokerage have cut off time of 1pm/2pm to buy MF at today's NAV. so can place order before that time.

I think this method can be most useful in midcap funds due to high variation in prices. Also, this can be applied to Gold ETF or any thing you like.

I want to backtest this strategy but too busy. Can anyone help?
Also, pls give your views on it....

 

[2021]

I have being doing the same from March onwards. Fund I picked was IDFC nifty which had no entry/exit load and my sucess ratio was 9/10. Simple strategy, buy when market is down 1% or more at 13.55 pm and 9 out of 10 times market closes sideways or same levels. Sell when fund is profitable. I collected 71.04 uints worth no extra money just by buying and selling funds worth rs 500 with addtional profit of almost 10-12% too. But recently IDFC changed it's exit load to 1% within 7 days. Now I'm planning to shift to JM Nifty, put 5000 initially whenever market is down more than a percent and add/withdraw 1000 as JM Nifty don't have exit load. This is purely a trade in mutual fund strategy and not advisible for those who can't risk money in highly fluctuating Nifty/market.

With this I also have SBI equity, investment of 1000 and reliance regular saving and balanced both with 500 investment used on every downfall and redeemed at every 2-3% returns to accumulate units in long term view. I keep adding on fall and wait for return of 2% atleast. I've fundsindia a/c and that helps a lot to keep a review on portfolio instead of making excel sheets. As for midcap, in past recent it is stable going sideways. Also if you play such strategy in large or multi cap your capital in long run is protected. As for portfolio, I have DSP 100, HDFC Mid Cap, Birla International A and HDFC Prudence and sip of IDFC Premier and SBI Global which I seldom touch.

PS - You should have enough cash to pour in on every fall and have patience. Don't look at NAVs daily and wait for right time to add or redeem.

 

[asterix24]

Hi Dweep and 2021,

I am experimenting with this mode of investing from June onwards. I agree with 2021's views and hopefully should be able to replicate his successes.

Happy Investing !!

 

[DWeeP]

@2021 Do you have some excel sheet so that I will be able to see the days when nifty went back more than 1% and corresponding NAV?

@asterix24 pls share your results.

BTW i am planning this strategy for long term = 5+ yrs to redeem.

 

[2021]

Sorry I don't have such excel sheet and on top of it I'm not techie who is much fimiliar to excel.

As for result, as I told these days I'm playing in SBI Magnum equity and RRSF-B, I took statement screen shot for redeemtion made yesterday on 25th May purchase, currently at 3.78% profits with rs 500+profit worth units still available in a/c.

Take a look

Also I found out that if I partial withdraw from my holdings, I don't get charged for exit load! Curretly my a/c is showing


SBI Magnum Equity(G) 499.00 41.1257 12.133 42.6800 18.86 (3.78%) 517.84

Here 499 is left amount invested initially (1000-500 minus STT) 41.1257 is purchase price, 12.133 is units left, 42.68 is last recorded nav (repurchase nav is 42.25!) 18.86 is profit at 3.78% and current holding returns is 517.84! That's what I call buy on dips, sell on rise mutual fund strategy.

 

[drsambu123]

Hi,

Just thinking about a new (for me!) mutual fund strategy which can be used instead of SIP:

Everytime - nifty goes down by 1% buy mf units worth rs. 1000.

Invest in mutual fund for long time - 5+ years.

Alternatively, an excel file can be prepared of major holdings of the fund you are interested in. And 1% rule may be applied to sum of change in % of these scripts.

Time: Most fundhouses/brokerage have cut off time of 1pm/2pm to buy MF at today's NAV. so can place order before that time.




I think this method can be most useful in midcap funds due to high variation in prices. Also, this can be applied to Gold ETF or any thing you like.

I want to backtest this strategy but too busy. Can anyone help?
Also, pls give your views on it....

Nice thread after long time. As for as ETFs are concerned (nifty bees, Bank nifty) u can buy at 13.55 for current NAV(real time). But in mutual funds u cant buy yesterdays NAV even at 10 am.
Buying for smaller corrections may be good in bull or sideways market where u can make profits nicely. But in bear markets like 2000-2003 or 2008-2009 what will u do for extra money to buy every 1% fall. I was doing the same in the past. But found it bit difficult to continue in long run.
Actually I am purchasing additional units whenever market corrects 5%.(in addition to SIP). Also i am skipping one or two SIP if market continously increase.

 

[drsambu123]

I have being doing the same from March onwards. Fund I picked was IDFC nifty which had no entry/exit load and my sucess ratio was 9/10. Simple strategy, buy when market is down 1% or more at 13.55 pm and 9 out of 10 times market closes sideways or same levels. Sell when fund is profitable. I collected 71.04 uints worth no extra money just by buying and selling funds worth rs 500 with addtional profit of almost 10-12% too. But recently IDFC changed it's exit load to 1% within 7 days. Now I'm planning to shift to JM Nifty, put 5000 initially whenever market is down more than a percent and add/withdraw 1000 as JM Nifty don't have exit load. This is purely a trade in mutual fund strategy and not advisible for those who can't risk money in highly fluctuating Nifty/market.

With this I also have SBI equity, investment of 1000 and reliance regular saving and balanced both with 500 investment used on every downfall and redeemed at every 2-3% returns to accumulate units in long term view. I keep adding on fall and wait for return of 2% atleast. I've fundsindia a/c and that helps a lot to keep a review on portfolio instead of making excel sheets. As for midcap, in past recent it is stable going sideways. Also if you play such strategy in large or multi cap your capital in long run is protected. As for portfolio, I have DSP 100, HDFC Mid Cap, Birla International A and HDFC Prudence and sip of IDFC Premier and SBI Global which I seldom touch.

PS - You should have enough cash to pour in on every fall and have patience. Don't look at NAVs daily and wait for right time to add or redeem.

if u book profit for every 2-3 % in equity MF , u have to pay exit load 1%. STCG tax also will eat our profit.After booking profit if market goes high suddenly northward what will u do.
Instead of Jm nifty WHY DONT U BUY Nifty Bees which has less expense %. IDFC nifty is good as for as expense % is concerned. but exit load makes us difficult to trade.

 

[2021]

if u book profit for every 2-3 % in equity MF , u have to pay exit load 1%. STCG tax also will eat our profit.After booking profit if market goes high suddenly northward what will u do.
Instead of Jm nifty WHY DONT U BUY Nifty Bees which has less expense %. IDFC nifty is good as for as expense % is concerned. but exit load makes us difficult to trade.

Investment or trading strategy differs from person to person and everyone has own set of rules, behaviors or procedures for ultimate goal of making profits.

My view can be of buy on dips and book partial profits on rise, someone else can have a view of buy on dips and keep it for long term like dweep, thread starter thinks and so on. Having said this, I should 1st make clear that I have money at disposal and is of no use and I've being Fixed Depositing on regular basis so 1% or 10% fall won't affect my pouring in of money. You are although right 1 has to have a pocket full of cash to keep buying at dips.

Secondly, you should have a goal set in mind and not just look at current or past navs or market rise/fall, like Arjun in Mahabharat, aim for eye and don't look here and there. If I was of view that market may go further high or may dip to all time low, I would be sitting on sidelines waiting to jump in and trust me all such jumps end in wrong steps hurting you badly, telling you from experience. So set a goal and work accordingly. My aim is buy on dips and book profits regularly and I keep it simple.

As for niftybees, although I have zerodha as broker and I've got percentage based brokerage of 0.2% buying and selling which is much lesser than 1% exit load and expense ratio does not affect me as I'm willing to pay extra penny for better services, I feel India has to grow and go a long way in ETFs. Today nifty closed 1.60% and niftybees was only up by 0.80%. ETFs are highly illiquid as of now. When market falls 1%, niftybees falls 3% even. It's more of a traders game telling you from Nasdaq N100 and Nifty M50 experience. You can easily gain half a percent within minutes and seconds as there is not much of activity. Yes it can be option but will take time. In developed economies people have ETFs as 70-80% portfolio but India hardly anyone buys it.

And finally, I don't pay taxes. It's plain and simple. My brother is a CA and I don't have to worry about taxes. My tax filings are taken care of. And paying exit loads in compare to earning profits in return is far better option. If profits don't come, world is not going to end either. Not till 2012 atleast!

 

[DWeeP]

Nice discussion in here

1% is a relative term and can be changed if markets take a clear down trend or so.
BTW i always have investible surplus! Good for me!
Also as i want to do this for long term, all market cycles will be covered. hence averaging it out.


I want to backtest this strategy but it seems quite tedious as i can't seem to get daily NAV easily. I want to see how many days average/ year when nifty goes down more than a %. and find their daily NAV. Than compare it with SIP of similar duration of same fund. Can anyone help?

@2021 Excel is very helpful. even I am non-tech related person still I use it frequently.
Taxes can be saved, but only upto a certain extent. Nothing much for salaried persons

@drsambu123 right abt ETF. I specifically mentioned Gold ETF coz i want to invest in it for long term on averaging basis. btw we seem to have same profession.

 

[2021]

I agree saving taxes for salaried is difficult. I have 3 a/cs for trading as well as mutual fund, 1 of my mother who is senior citizen 2nd of my wife and third mine and I'm self-employed so I have no tensions till income upto 5-6 lacs. Most investments, fixed depsoits are in my mothers name and trading is done in wife's name thereby getting no-income tax zone upto rs 4 lacs 40 thousand (2.5+1.9). The rest is in my name and having CA brother save some extra penny too.

http://www.nseindia.com/content/indices/ind_histvalues.htm here you can find historical data of nifty as well as other indices like mid cap and small cap, bank et al. http://www.amfiindia.com/NavHistoryReport_Frm.aspx here you can find old navs for particular fund.

If you are long term investor and if your aim is 3-5 years, rest assured you need no data. Even if nifty goes to 2000, you'll not get affected as it won't go in 1 day. Even if goes say in 3 months, you'll get more units for same price and thus accumulation value increases.

For quick check on past performance, check valuereserch's fund performance for example JM Nifty http://www.valueresearchonline.com/funds/fundperformance.asp?schemecode=10220 here. For fund you choose, moneycontrol's graph, historical data and valuereserch's fund performance and trailing returns can also come handy.