FREEDOM / WISE
Worked ExampleHand-crafted

What does one fear-greed cycle cost a ₹20K monthly SIP investor?

Scenario

Three investors with identical ₹20K monthly SIP into Nifty 500 from Jan 2018 to Dec 2024 (7 years, including March 2020 drawdown of ~32%): Investor A continued SIP throughout; Investor B paused SIP March-September 2020; Investor C redeemed half corpus April 2020, re-entered August 2020.

Inputs

Drawdown event
March 2020 -32%
Horizon months
84
Monthly sip INR
20000

Calculation

  1. 1.

    Investor A: total invested

    ₹20K × 84 months → ₹16.80 L

  2. 2.

    Investor A: terminal corpus Dec 2024

    sustained SIP at 12-13% effective CAGR → ₹30.00 L

  3. 3.

    Investor B: pause 6 months, total invested

    ₹20K × 78 months → ₹15.60 L

  4. 4.

    Investor B: terminal corpus

    sustained SIP at 9-10% effective CAGR → ₹23.00 L

  5. 5.

    Investor C: locked in 30% loss on ₹8L existing corpus

    ₹8L × 30% → ₹2.40 L

  6. 6.

    Investor C: terminal corpus Dec 2024

    sustained SIP at 6-8% effective CAGR → ₹19.00 L

Conclusion

On a single fear-greed cycle: Investor A (disciplined) ~₹30L; Investor B (paused) ~₹23L; Investor C (panic-sold) ~₹19L. The disciplined investor outperforms the panic-seller by ₹10-14 lakh on just one cycle. Most retail investors experience 2-4 such cycles over a 25-year working life.

Tradeoffs

The cost compounds with each subsequent cycle. Two fear-greed cycles over 25 years can cost ₹25-40 lakh of terminal wealth vs disciplined continuation. The opportunity cost of trying to time the market is consistently higher than the cost of holding through volatility.

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