Kalpesh Ashar,CFP, Sebi RIA:“Consistency is the key to success in investing”
SIPs have helped retail investors build wealth. What started as a simple strategy to invest regularly, without straining monthly budgets, has now become a financial habit.The key to SIPs’ success lies in staying invested through all market conditions rather than trying to time the market. Historical data shows that consistently investing, regardless of volatility, yields better results. Pausing or stopping SIPs during downturns goes against the very principle of this strategy and can be detrimental to wealth creation. In fact, volatile markets present an opportunity to accumulate more units at lower valuations, which can enhance long-term returns.
For those invested in midand small-cap funds, proper allocation based on individual risk appetite is crucial. If approached wisely, these funds can play a significant role in generating higher returns within a mutual fund portfolio.Ultimately, SIPs provide a disciplined approach to investing, allowing retail investors to systematically participate in the market. Rather than attempting to time investments, staying committed to SIPs can lead to more consistent and rewarding financial growth. Consistency is the key to success in investing.
Aashish Somaiyaa,CEO, WhiteOak Capital AMC:“Volatility helps improve the average returns”
Timing is important, but it’s not possible to consistently catch peaks and troughs with any level of accuracy.
Small cap is not a label for discrimination. Given that some companies are evolving and expanding in scale, market cycles manifest more sharply and make the small-cap space volatile. This is precisely why we suggest SIPs. The more volatile an asset class, the higher the amplitude of peaks and troughs, making it tougher to time.Individuals often become overly enthusiastic when the market is performing well, and invest with optimism. However, when the market declines, they panic and withdraw, believing that staying invested is no longer worthwhile.
This is where a long-term perspective becomes critical. Markets will always have their ups and downs, but staying invested through the cycles allows you to benefit from the power of compounding and the natural growth trajectory of well-chosen assets. Remember, the biggest upticks often come amidst bearish market conditions and they come to those who resist the urge to react to every market movement.
This is where the role of financial advisors, fund managers and distributors is crucial. They are responsible not only for stock selection and portfolio management but also hand hold and guide investors to stay the course.
Karan Aggarwal,CIO, Elever:“Mid caps tend to outperform in the long term”
Historical data strongly favours letting your SIP run rather than attempting to time the market.
Even during significant bear markets like the global financial crisis (2008-9) and India’s external account crisis (2011-13), a timediversified SIP portfolio recovered quickly, breaking even by April 2009, and keeping pace with inflation by June 2009, just 18 months after the initial investment. The SIP approach delivered an annualised return of 11.08%, compared to just 5.54% for the Nifty 50, highlighting its ability to capitalise on market downturns by ‘buying the dip’.
Mid-cap funds have historically outperformed large caps over longer periods. For instance, a 10-year SIP in mid-cap index funds starting in 2016 would have generated an annualised return of 17% by 2025, compared to 14.25% for the Nifty 50 Index Fund. Even in cycles where mid caps underperform in the short term, historical patterns suggest mean reversion over a decade.
Given the current market conditions, where mid caps have outperformed large caps with a three-year alpha of 15-16%, SIP investors are well-positioned to benefit from lower prices during downturns and excess returns in future growth phases. Instead of trying to predict short-term fluctuations, staying invested through SIPs helps neutralise timing risks and enhances long-term returns.
Radhika Gupta,MD & CEO, Edelweiss Mutual Fund:“Investing during downturns is most rewarding”
The true rewards of SIPs are seen over the long term. A Rs.10,000 SIP in the Nifty 50 TRI since January 2004 grew to `1.26 crore in 21 years, with 71% of the gains accruing in the last seven years.
History shows that staying invested through market downturns leads to strong recoveries. During the 2008 financial crisis, an SIP in the Nifty TRI had an XIRR loss of 26.4%. Yet, by August 2010, the same SIP delivered a 16.1% gain. Similarly, an SIP started during the 2020 Covid crash initially saw a 16.2% loss, but rebounded to a 13.31% gain by 2023.
Skipping SIPs during downturns means missing out on buying units at lower prices, which reduces future gains. The investors who continue SIPs during market declines accumulate more units, helping them recover losses faster when the markets rebound.
Since 2003, only 2.4% of all 10-year SIPs in the Nifty 50 TRI have resulted in a loss. Mid caps, despite higher volatility, have also delivered strong long-term returns, averaging 17.3% over a decade.
Rather than attempting to time SIPs, investors should align them with long-term financial goals like education or retirement. To manage risk, it’s advisable to shift from equities to debt two years before financial goals mature. Time, rather than timing, remains the most powerful tool for SIP investors.