A thread on Price Based Systematic Investment Plan (PB-SIP) methodology which I follow for my stock investments 👇

In this thread I write about
- What is price based SIP?
- Features of PB-SIP
- What is the merit of Price Based-SIP over Time Based SIP (TB-SIP)?

Note:
- This methodology is NOT backtested (so, it could be bullshit). I follow this approach because it makes logical sense to me

- This method is not about how to pick the right stocks. This is about how I do SIP in the stocks that I already shortlisted based on fundamentals
What is SIP?

SIP is a methodology where an investor invests in an instrument in a periodic manner.

The metric widely used to define periodicity is time i.e, SIP is done monthly or bi-weekly or quarterly.

However the periodicity could also be dictated by price instead of time.
What is Price Based SIP?

- PBSIP is the type of SIP where you do a SIP instalment when price action gives you a signal to buy

- The time intervals between two PB-SIP instalments is uneven and dictated by price action

- The SIP instalment amount is also dictated by price action
Features of PBSIP:

- SIP amount is proportional to how far the buy price is away from 52 week high

- During downtrend, the SIP amount will be equivalent to martingale type position sizing

- During uptrend, the SIP amount will be equivalent to pyramiding type position sizing
Lets say we have 14 stocks in folio & invested 1L in each stock to begin with. Now we want to do PB-SIP

The rules:

1. Buy when Supertrend 7,5 gives buy in 1H chart
2. SIP amount=X*Y/14

where,
X: % buy signal is away from 52 week high
Y: total invested amount (=14L for 1st SIP)
Example

ASIANPAINT ST75 level in 1H is 17.7% away from 52 week high

TITAN ST75 level in 1H is 3.8% away from 52 week high

Lets say first AP gave a buy, then TITAN gave a buy

1st SIP amount in AP = (0.177*1400000/14) = 17700

1st SIP amount in TITAN = (0.038*1417770/14) = 3848
Intent here is to buy more of stocks under correction, assuming that the underlying company is quality enough that its stock price ⬆️ in long run

We can multiply SIP amount in equation with risk_appetite_factor, which ⬇️ with each passing year, as we inch closer to corpus target
Potential demerit of this system:

Stock with the highest % return (ex TATAELXSI) in our portfolio will have least amount invested as buy signals would have been near 52 week high

Stock under consolidation/correction (ex ITC, HUL) with lowest % return will have higher weightage
Favorable scenario :
In stock like RADICO, we SIP-ed small amount during the hyperbolic run up (Apr-Dec'21) and are SIP-ing big amount now when it is under correction

Ideal scenario:
Stocks like ITC run up big some day, and we have accumulated it enough using this methodology.
I chose ST 7,5 as it gives 10-15 buy signals in an year, which fits my requirement

One can finetune ST parameter and risk_appetite_factor as per needs

Conclusion:
Time based SIP is agnostic to price action, which I feel is non-ideal. Price based SIP potentially overcomes this.

You May Also Like

Trump is gonna let the Mueller investigation end all on it's own. It's obvious. All the hysteria of the past 2 weeks about his supposed impending firing of Mueller was a distraction. He was never going to fire Mueller and he's not going to


Mueller's officially end his investigation all on his own and he's gonna say he found no evidence of Trump campaign/Russian collusion during the 2016 election.

Democrats & DNC Media are going to LITERALLY have nothing coherent to say in response to that.

Mueller's team was 100% partisan.

That's why it's brilliant. NOBODY will be able to claim this team of partisan Democrats didn't go the EXTRA 20 MILES looking for ANY evidence they could find of Trump campaign/Russian collusion during the 2016 election

They looked high.

They looked low.

They looked underneath every rock, behind every tree, into every bush.

And they found...NOTHING.

Those saying Mueller will file obstruction charges against Trump: laughable.

What documents did Trump tell the Mueller team it couldn't have? What witnesses were withheld and never interviewed?

THERE WEREN'T ANY.

Mueller got full 100% cooperation as the record will show.
@EricTopol @NBA @StephenKissler @yhgrad B.1.1.7 reveals clearly that SARS-CoV-2 is reverting to its original pre-outbreak condition, i.e. adapted to transgenic hACE2 mice (either Baric's BALB/c ones or others used at WIV labs during chimeric bat coronavirus experiments aimed at developing a pan betacoronavirus vaccine)

@NBA @StephenKissler @yhgrad 1. From Day 1, SARS-COV-2 was very well adapted to humans .....and transgenic hACE2 Mice


@NBA @StephenKissler @yhgrad 2. High Probability of serial passaging in Transgenic Mice expressing hACE2 in genesis of SARS-COV-2


@NBA @StephenKissler @yhgrad B.1.1.7 has an unusually large number of genetic changes, ... found to date in mouse-adapted SARS-CoV2 and is also seen in ferret infections.
https://t.co/9Z4oJmkcKj


@NBA @StephenKissler @yhgrad We adapted a clinical isolate of SARS-CoV-2 by serial passaging in the ... Thus, this mouse-adapted strain and associated challenge model should be ... (B) SARS-CoV-2 genomic RNA loads in mouse lung homogenates at P0 to P6.
https://t.co/I90OOCJg7o