Volatile markets can be terrifying for investors. The ups and downs make them struggle to maintain composure and consistency with their investments. They tend to feel counterintuitive. Many react emotionally; they pull out funds, pause investments, or hoard cash. SIPs let you invest in a steady and disciplined way, even in market volatility.
When lump sum investments turn riskier and emotionally taxing, Systematic Investment Plans work. SIPs let you turn volatility into an advantage, so every investor should know ‘what is SIP’ in detail.
So, to avoid lost chances and regret, let’s learn about the benefits of SIPs during difficult times.
Why Volatility Shouldn’t Scare You
Markets move in cycles; something rises, others fall, and corrections are normal. Volatility does not always mean loss. It can come with opportunity, especially when approached systematically.
Emotional Investing vs. Systematic Investing
Investors who try to time the market often fall prey to fear and greed. They buy high in euphoria and sell low in panic. On the other hand, systematic investing avoids this emotional rollercoaster by sticking to a plan.
Rupee Cost Averaging: Your Secret Weapon
When you invest via SIPs, you buy more units when the market is down and fewer when it is up. Over time, this averages out your cost per unit, reducing the impact of volatility, a concept known as rupee cost averaging.
What is SIP, and How Does SIP Work?
SIP is a method of regularly investing a certain amount in a mutual fund scheme (monthly, weekly, or quarterly).
How Does SIP Work?
- You pick a mutual fund and decide an amount (say ₹5,000/month).
- The money is automatically debited from your bank account on a set date.
- Based on the day’s NAV (Net Asset Value), you are allotted units of the fund.
Example:
Investor A invests ₹10,000 monthly in a mutual fund. Over six months, NAVs fluctuate—but SIP ensures consistent investment, allowing him to buy more units when prices drop and fewer when they rise.
Types of SIPs:
- Any Day SIP: Flexibility in picking any date of the month.
- Top-Up SIP: Increase your SIP amount periodically.
- Flexible SIP: Adjust investment amount based on income or market conditions.
- Perpetual SIP: No fixed end date, and it continues until you stop it.
Benefits of SIP in a Volatile Market
The benefits of SIP in a dwindling market will surprise investors when they discover what they will get out of it. The key ones are given below;
- Rupee Cost Averaging: Volatility helps you buy more units at lower prices, reducing average cost and maximising long-term returns.
Stat: Over 10 years, SIP investors in equity funds saw 12–15% average returns even through market ups and downs.
- Power of Compounding: Your returns generate more returns over time. A ₹5,000/month SIP at 12% returns for 20 years becomes ~₹50 lakhs.
Mini-example: Start at age 30 vs. age 40; the difference is over ₹2 crores in corpus.
- Financial Discipline: SIPs enforce consistent saving and investing—no excuses, no delays.
- Convenience and Accessibility: Set it up once and it runs automatically. You do not need to track markets or remember dates.
- Diversification: SIPs spread risk across sectors and asset classes by choosing diversified mutual funds.
- Avoiding Behavioural Biases: SIPs shield you from panic-driven exits during crashes or euphoric over-investing during rallies.
- Emergency Fund Creation: Short-term SIPs in low-risk debt funds can create a liquid emergency fund.
- Step-Up SIP Advantage: As your income grows, a Step-Up SIP lets you increase investments to match future goals.
Example: ₹5,000/month SIP with a 10% annual step-up becomes ~₹1 crore in 15 years.
SIP vs Lump Sum Investing
| Aspect | SIP | Lump Sum |
| Market Timing | Not required | Crucial |
| Volatility Management | Excellent via cost averaging | Poor during market downturns |
| Ideal Market | Volatile or uncertain | Bullish, rising markets |
| Investor Discipline | High, regular, and automatic | Low – one-time effort |
| Accessibility | Very beginner-friendly | Needs surplus capital |
When SIP Wins:
- During volatile or uncertain markets
- For long-term goals (retirement, children’s education)
- For investors with monthly income
When Lump Sum Works:
- In bull markets
- After receiving a windfall (bonus, inheritance)
- If you can tolerate risk and time the entry well
Who Should Choose SIPs?
SIPs are a great fit for:
- First-time investors looking for a low-risk entry
- Salaried individuals with steady income
- Goal-based investors (retirement, buying a house, child’s future)
- Risk-averse investors who dislike timing the market
- Women investors building independent wealth step-by-step
Start Early, Reap Big
Time is the most powerful factor in wealth creation. The earlier you start a SIP, the more you benefit from compounding.
Example:
Start at age 30 with ₹10,000/month = ~₹3.5 crore by 60
Start at age 40 with the same SIP = ~₹1 crore
Waiting even 10 years can reduce your final corpus by over 70%!
Conclusion
Market volatility might unsettle short-term traders, but it is an opportunity for smart investors. So, now you understand what is SIP and you know how it works. When you trust SIPs, you reap the benefits and turn your short-term uncertainty into long-term prosperity.
Stay consistent. Start early. Let volatility work for you, not against you. Ready to start your SIP journey? Now is the best time.
