{"id":2088243,"date":"2018-10-04T19:04:41","date_gmt":"2018-10-04T13:34:41","guid":{"rendered":"http:\/\/stockviz.biz\/index.php\/?p=2088243"},"modified":"2018-10-05T11:21:55","modified_gmt":"2018-10-05T05:51:55","slug":"systematic-buy-the-dip-an-update","status":"publish","type":"post","link":"https:\/\/stockviz.biz\/index.php\/2018\/10\/04\/systematic-buy-the-dip-an-update\/","title":{"rendered":"Systematic Buy-the-Dip, an Update"},"content":{"rendered":"<p>We had looked at the difference between buying the dip vs. a daily SIP back in June-2016 (<a href=\"https:\/\/stockviz.biz\/2016\/06\/25\/systematic-buy-dip\/\">link<\/a>.) The following is an update and an expansion of the same idea.<\/p>\n<h3>Introduction<\/h3>\n<p>Everybody wants to &#8220;buy the dip.&#8221; We wanted to run some numbers against what investors would typically do if they were to follow such a strategy. <\/p>\n<ul>\n<li>We invest Rs. 1 every day the market is open.<\/li>\n<li>For SIP, we buy Rs. 1 of a particular index.<\/li>\n<li>For DIP, we either invest in cash or we liquidate the cash account and buy the index (if there is a &#8216;dip&#8217;), and we continue to invest Rs. 1 in the index as long as it is in DIP.<\/li>\n<\/ul>\n<p>To define a DIP, we need two things.<\/p>\n<ol>\n<li>The look-back (formation) period over which percentage loss from peak is observed.<\/li>\n<li>The threshold percentage loss from peak.<\/li>\n<\/ol>\n<p>The scenario will continue to be in DIP as long as the index is trading a threshold percentage below its peak.<\/p>\n<p>The following shows the periods in which the NIFTY was purchased in red. The look-back period was 100-days and the threshold was -10%. This translates to &#8220;buy the index only when it is trading 10% below its previous 100-day peak.&#8221;<\/p>\n<p><a href=\"https:\/\/github.com\/stockviz\/blog\/raw\/master\/tactical%20sip\/NIFTY%2050.DD.100.-10.png\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/github.com\/stockviz\/blog\/raw\/master\/tactical%20sip\/NIFTY%2050.DD.100.-10.png\" width=\"7200\" height=\"3600\" alt=\"NIFTY buy the dip\" class=\"alignnone size-full\" \/><\/a><\/p>\n<p>Here&#8217;s the one for &#8220;buy MIDCAP only when it is trading 15% below its previous 200-day peak.&#8221;<br \/>\n<a href=\"https:\/\/github.com\/stockviz\/blog\/raw\/master\/tactical%20sip\/NIFTY%20MIDCAP%20100.DD.200.-15.png\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/github.com\/stockviz\/blog\/raw\/master\/tactical%20sip\/NIFTY%20MIDCAP%20100.DD.200.-15.png\" width=\"7200\" height=\"3600\" alt=\"MIDCAP buy the dip\" class=\"alignnone size-full\" \/><\/a><\/p>\n<p>We expand on our previous attempt by adding more indices and running the scenario through rolling 5-year periods. We then compare the terminal value of the <strong>number of units<\/strong> of the index purchased under DIP with SIP.<\/p>\n<h3>Results<\/h3>\n<p><a href=\"https:\/\/github.com\/stockviz\/blog\/raw\/master\/tactical%20sip\/table.asset-diff.DD.png\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/github.com\/stockviz\/blog\/raw\/master\/tactical%20sip\/table.asset-diff.DD.png\" width=\"5400\" height=\"2100\" alt=\"buy the dip results\" class=\"alignnone size-full\" \/><\/a><\/p>\n<p>There are very few scenarios where DIP buying is better than SIP buying. This happens to the NIFTY when you buy it when it is trading 20% below its 100\/200\/500-day peak. However, this is &#8220;on average.&#8221; There were 5-year periods when DIP buying would have resulted in about 5% less assets than SIP buying under the same lookbacks.<\/p>\n<p>Hence, we reassert our previous finding that waiting for the dip is not a good idea compared to a simple daily SIP.<\/p>\n<p>Note that we define success as the terminal value of the number of units of the index purchased. This is different from each unit being profitable.<\/p>\n<p>Code is on <a href=\"https:\/\/github.com\/stockviz\/blog\/tree\/master\/tactical%20sip\" rel=\"noopener\" target=\"_blank\">github<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>We had looked at the difference between buying the dip vs. a daily SIP back in June-2016 (link.) The following is an update and an expansion of the same idea. Introduction Everybody wants to &#8220;buy the dip.&#8221; We wanted to run some numbers against what investors would typically do if they were to follow such &hellip; <\/p>\n","protected":false},"author":2,"featured_media":2050211,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3471],"tags":[960,3833],"class_list":["post-2088243","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing-insight","tag-returns","tag-sip","entry"],"_links":{"self":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/2088243","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/comments?post=2088243"}],"version-history":[{"count":0,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/2088243\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/media\/2050211"}],"wp:attachment":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/media?parent=2088243"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/categories?post=2088243"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/tags?post=2088243"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}