Comparison Between SIP and STM (Stressless Trading Method - Dozen Diamond Strategy)
While both aim for long-term financial growth, they differ in methodology, risk, returns, and investor involvement. This blog provides an in-depth comparison to help investors choose the most suitable approach.
Table of Contents
Introduction
Investing is a crucial step in wealth creation, and different strategies cater to different investor profiles. Two widely discussed approaches are Systematic Investment Plan (SIP) and STM (Dozen Diamond Strategy). While both aim for long-term financial growth, they differ in methodology, risk, returns, and investor involvement. This blog provides an in-depth comparison to help investors choose the most suitable approach.
What is SIP (Systematic Investment Plan)?
Systematic Investment Plan (SIP) is a disciplined way to invest in mutual funds. Under this plan, investors contribute a fixed amount at regular intervals (e.g., monthly, quarterly) into a mutual fund of their choice.
Key Features of SIP
- ✅Periodic Investments: Fixed contributions at regular intervals reduce market timing risks.
- ✅Rupee Cost Averaging: Buys more units when prices are low and fewer units when prices are high.
- ✅Compounding Benefits: Long-term reinvestment leads to exponential growth.
- ✅Lower Risk: Diversified investments reduce volatility impact.
- ✅Affordability: Suitable for retail investors with low capital.
- ✅Diversification: Investments spread across various sectors and asset classes.
What is STM (Dozen Diamond Strategy)?
The STM (Dozen Diamond Strategy) is an investment method where an investor selects high-quality stocks and holds them for a long period to maximize wealth creation. It is a white-box strategy based on accounting principles.
Key Features of STM
- ✔️Stock Selection: Investors choose high-quality stocks with long-term growth potential.
- ✔️Long-Term Approach: Encourages holding stocks for an extended period.
- ✔️Higher Risk, Higher Reward: Direct stock exposure means greater volatility and potential for higher returns.
- ✔️Research-Driven: Requires fundamental analysis of companies and market trends.
- ✔️Wealth Creation Focus: Aims to outperform indices through a structured investment strategy.
SIP vs. STM: A Detailed Comparison
| No | Feature | SIP (Systematic Investment Plan) | STM (Stressless Trading Method - Dozen Diamond Strategy) |
|---|---|---|---|
| 1 | Investment Type | Regular investments in mutual funds | Direct stock selection based on strategy |
| 2 | Approach | Passive, long-term wealth growth | Active, structured stock buying/selling |
| 3 | Risk Level | Lower risk due to diversification | Higher risk, but potential for higher returns |
| 4 | Returns | Market-linked, compounding over time | Returns depend on stock selection and strategy execution |
| 5 | Flexibility | Can increase, decrease, or stop investment | Predefined strategy, requires following specific rules |
| 6 | Market Adaptability | No active market adjustments, relies on long-term growth | Adjusts based on step size, target price, and cash management |
| 7 | Investment Frequency | Periodic (e.g., monthly, quarterly) | Flexible (can be lump sum or periodic based on step size) |
| 8 | Cost Averaging | Automatic through rupee cost averaging | Partially applies cost averaging through predefined step size |
| 9 | Investor Involvement | Minimal, suitable for passive investors | Requires some monitoring and strategy adherence |
| 10 | Withdrawal Option | Long-term, limited liquidity | Allows cash withdrawals based on strategy execution |
| 11 | Who Should Invest? | Investors seeking stable, long-term growth | Traders looking for a structured yet flexible trading approach |
How STM Can Be Confused as a Combination of Lump Sum and SIP
Many investors mistakenly view STM (Dozen Diamond Strategy) as a hybrid between Lump Sum Investing and SIP due to its structured yet flexible nature.
- 📊Lump Sum Similarities: Investors in STM often deploy capital in a batch, selecting stocks at once rather than investing small amounts at regular intervals.
- 📊SIP-Like Qualities: Investors might gradually build their portfolio by investing in these stocks at different intervals (Step size), giving an impression of an SIP approach.
- 📊Periodic Monitoring and Adjustments: Unlike a pure lump sum investment, STM does not require periodic monitoring and adjustments. It buys and sells as per the Step size.
- 📊Rupee Cost Averaging (Partial Application): While lump sum investments depend on a single price point, STM is a predefined strategy that buys and sells definite quantities of stock with price changes.
Why STM is Not a True Combination of SIP and Lump Sum
- ✅Not a True SIP: SIP involves systematic, recurring investments into a fund, while STM focuses on stocks.
- ✅Not a Pure Lump Sum Either: Unlike lump sum investing, STM may involve incremental investments, ongoing research, and flexible options like portfolio adjustments.
- ✅Stock-Specific Nature: SIP spreads risk across multiple assets, while STM concentrates on stocks. It is a more strategy-based approach, increasing exposure to individual stock performance.
Conclusion
Both SIP and STM (Dozen Diamond Strategy) come with their own advantages and risks.
- ✅SIP is well-suited for passive investors aiming for steady, long-term wealth growth.
- ✅STM caters to those committed to long-term investing while maintaining the flexibility to withdraw cash monthly if required.
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FAQ (Frequently Asked Questions)
What is the company’s product?
Stressless Trading Method (STM) is the first flagship product of the company. It is an automated trading platform in equity stock market segment.
What is the return on investment?
DD’s forte is Stressless Trading and Extra Cash. Users can themselves evaluate their experience of Stressless ness in investing with DD and get decent Extra Cash on a monthly basis.
What are the benefits of Investing in DD?
DD specialises in Stressless Trading method, a unique concept that gives higher advantage to investors together with control and monitoring of the investments.
Why do you call Stressless Trading?
DD App (KOSH App) is equipped with more advanced sophisticated tools & analytics. This tool will help investors to track their investment performances.
How does STM function?
To understand the details of STM, we request you as-need to be removed to sign up for the webinar. Our unique product details will be explained to you in the webinar. Please Login in to https://dozendiamonds.com/ to register for the webinar.
