We Tested Buy The Dip For 25 Years Heres The Result

TITLE: We Tested “Buy the Dip” for 25 Years. Here’s the Result. CHANNEL: Zerodha Varsity DATE: 2026-05-08 ---TRANSCRIPT--- SIPs are boring. You get a salary credited message every month and then a day later a fixed amount is debited and invested into a mutual fund. You decide the amount, you decide which fund it gets invested in, even the date that it should be invested. And this happens like clockwork every single month. That is why I called it boring. There’s no thrill when you make an investment. There is no moment where you feel clever and more importantly there is no story to tell at a party. And we all love to tell a story that makes us look clever. Imagine a crash like March 2020. The Nifty fell nearly 40% in a matter of weeks and if you had money on the sidelines you would have jumped to invest at some point. You could have then boasted about your brilliance on WhatsApp groups after the market had recovered and zoomed upwards. And that is the feeling people like me are chasing. We want the thrill. We want to feel a little in control of our investments. So we try to time the market. We wait for it to fall and then we buy the dip. It’s something that a boring SIP investor would never do. But we also think we’ll make more money this way. I mean just think about it. This chart is how the Indian markets look in the long run. The markets have headed higher and higher. So when you take the SIP route what you’re doing is you’re investing at higher and higher levels, right? Your average cost of buying just keeps increasing. So your end returns should be lower. On the other hand when you buy the dip you buy when the market falls like here and here and even here. So when you buy low and the market rises you should make more money in the long run. That’s how it should be, right? So we decided to test this out. We compared a boring SIP investor with an adventurous buy-the-dip investor to see who comes out on top. So, let’s dive in.

[music] So, we took the Nifty 50 for this analysis, or rather the Nifty 50 total return index. Now, most of us are used to seeing the regular Nifty 50 price return index. That 25,000 level that you see on TV screens, that. But, the total return index is actually a better measure because it also assumes that the dividends paid by the companies in the index are reinvested back, and that earns further returns. And this matters more than you actually think because the dividends reinvested can add a meaningful chunk to your final corpus. 1% or more every year. So, when it’s compounded over a 20-year period, the end result can be significantly higher than if you had just taken the price index. So, whenever you’re actually evaluating long-term returns, the TRI is the right benchmark to use. Anyway, we then ran the numbers from 2000 to 2026. That’s roughly 25 years of data covering the dot-com bust to 2008 financial crisis, demonetization, COVID, and everything in between. For the SIP strategy, we assumed 10,000 rupees was invested every month into the index. Simple, boring, and automatic. And to make the comparison fair, for the buy-the-dip investor, we assumed the same 10,000 rupees per month. But, instead of going straight into an equity mutual fund, that money sat in a savings account first, earning 6% per year, waiting for the market fall by a predetermined percentage before it would be invested or deployed. And we took four scenarios. Scenario one is when a 2 to 5% fall from the market peak gets is investor excited, and they begin buying the dip. Scenario two is a correction of 6 to 10%. Scenario three is a drop of 10 to 20% and scenario four is a massive correction of 20% or more. That is when the bear market officially begins. In each of these scenarios, the money accumulated in the savings account, that would be moved into the equity mutual fund, but not in one shot, but gradually. From the trigger date of the correction to when the market recovered back to its previous peak. And let me explain this with an example so that there’s absolutely no confusion at all. Take scenario one of a 2 to 5% correction which triggers a buy. Now say I’ve been waiting for 10 months and I’ve accumulated 1 lakh rupees in my savings account. The market hits a peak of 20,000 and then drops 2%. I buy. It falls another 3%. I buy again. But on the third day, the market recovers back to 20,000. So I stop buying. My 1 lakh rupees has been split evenly across those two down days, 50,000 rupees each time. Now here’s the important part. This is being done with perfect hindsight. In real life, you won’t know when the recovery is coming. [music] So on day one, you might invest only 20,000 rupees. You might be cautious thinking, “Oh, how much more can the market fall?” And you don’t want to actually rush in. On day two, as the market falls further, you now feel a little braver and put in 60,000 rupees. But then the market recovers before you can invest anymore. So what you’re left with is 20,000 rupees still sitting in the bank that is waiting for the next dip. In our calculation, we have assumed that there’s perfect hindsight, which means we are giving the buy the dip the cheat code to win against SIPs. And now we’re going to see what actually happens even in that case. Okay, let’s look at the numbers now. The SIP investor, after 25 years of boring automated monthly investing, ends up with 2.5 crore rupees. And I just want to tell you that this person has invested only a little over 31 lakh rupees during this whole period. [music] So, what you’re seeing this difference is the power of compounding and growth. And that is not bad at all for just setting it and forgetting it. So, let’s look at the buy the dip investors now. Scenario one, the 2 to 5% correction buyer ends up with 2.57 crore rupees. Scenario two is at 2.59. Scenario three is 2.60 crores. And scenario four, the patient investor who waited for the big crash, they end up with 2.57 crore rupees. [music] Now, let that sink in for a second. After 25 years, after all that tracking, waiting, [music] and that excitement of timing the market perfectly, the best-case outcome is 2.6 crore versus the SIP’s 2.54 crores. [music] And that is with perfect hindsight. The extra effort and the extra mental energy produced almost nothing. Now, before we move on, I want to spend a moment on something important. Why does this happen? Intuitively, buying low should mean better returns. So, what is going on? Well, remember that chart I showed you of the Nifty? If you don’t, here it is again. And the one thing I want you to pay attention to is that markets spend far more time going up than in going down. Think about it this way. Over the last 25 years, the Nifty has compounded at around 12 to 14% per year. That growth doesn’t happen evenly. A huge chunk of the total return is concentrated in, well, a surprisingly small number of trading days. Sometimes just 10 or 15 days in an entire year. Now, you might have seen charts like these which say, “If you miss the best 10 days, here is how much money you would have lost.” Now, I’m not going to talk about how accurate those stats are, but the point is that if your money is sitting in a savings account at 6% [music] waiting for the perfect dip, it is probably missing out on many of those good days. [music] And missing even a handful of the best days in a 25-year window can seriously dent your final returns. [music] Even if you somehow manage to buy the dip, there’s also the opportunity cost. Every month that your 10,000 rupees sits in a savings account instead of a mutual fund, it is earning a return of 6% per annum instead of potentially 12 to 14% per annum. Over hundreds of months across multiple waiting periods, that difference compounds into actual real money lost. And if you’re sitting and just waiting for that 20% bear market fall in scenario four, well, those crashes don’t happen very often. The market can go years without a major correction. So, you could be waiting for 18, 24, even 36 months with your money underperforming in a savings account. All the while, the market is quietly going up from say 15,000 to 22,000, and you have completely missed a rally because it never fell 20% first. And I already know what some of you are thinking. What about 2008? What about March 2020? If you had perfectly timed those crashes and rushed to put all your money in at the bottom, those returns would have been massive. And you’re absolutely right. If you had actually bought at the exact bottom of the 2008 crash or in March 2020, the day the Nifty hit its COVID low, you would have made extraordinary returns. But tell me honestly, would you have actually been able to do that? When every news headline was pure panic, would you actually have been able to go in and buy? Or did you keep wondering how much more could the market fall and worry about it doing nothing at all? And even if you were brave enough and you decide to invest, did you buy enough? Because most people who bought the dip in 2020 put in a small amount, felt good about it, and then watched the market recover faster than they expected. They never deployed the full amount that they actually wanted to. And I told you that our buy the dip model assumed perfect hindsight. And it still couldn’t move the results that much. So, timing the market sounds easy, but it is brutally hard. Now, let me also address another thing. You might say 25 years is too long. So, we ran the numbers for shorter horizons, too. Multiple rolling 5-year windows, multiple rolling 10-year windows, different start and end points across those 25 years. And the story was the same. There was no meaningful difference between what a boring SIP gives you versus what a time-consuming buy the dip strategy gives you. The buy the dip does win against SIPs in most cases, but the margin is tiny. It is almost never worth the mental effort. Here’s the framework that makes sense to me now. Take your regular monthly income and set up that SIP. Automate it. Forget about it. Go paint a wall. The SIP will quietly do its job of buying when the market is up, buying when the market is down, and averaging it out over time. It is not glamorous, for sure, but it works. And that is what matters. And if you get a bonus or an incentive and you have some extra lump sum that isn’t part of your regular budget, use that to scratch the itch of buying the dip. Keep a small fund to buy when the opportunities arise and when the market falls sharply, it gives you the thrill. It keeps you engaged and it won’t derail your long-term wealth. So, stay boring and we’ll see you soon in the next video.