Equity markets frequently witness sharp swings due to global events, economic developments and changes in investor sentiment. Such volatility can create uncertainty among investors, particularly those deciding whether to continue SIP investments or deploy a large amount at one time.

According to Hemant Rustagi, volatility is a natural part of equity markets, and investors should focus on discipline and long-term goals rather than short-term market movements.

“Markets never move in a straight line. They go up, come down and remain volatile at times. Investors who continue investing in a disciplined manner during volatile periods are usually the first to benefit when markets recover,” Rustagi said.

He added that equity investments should ideally be aligned with long-term financial goals such as retirement planning, children’s education or long-term wealth creation.

“If investors have a long time horizon of five, ten or fifteen years, short-term volatility should not worry them. What matters is clarity of goals and staying invested for the long term,” he said.

Experts say SIP is particularly effective during volatile markets because it follows the principle of rupee cost averaging. Through SIP, investors invest a fixed amount at regular intervals regardless of market levels.

Explaining the concept, Viral Bhatt said SIP allows investors to accumulate more units when markets fall and fewer units when markets rise.

“For example, if an investor invests Rs 10,000 through SIP when the Net Asset Value (NAV) of a fund is Rs 50, the investor receives 200 units. If market volatility pushes the NAV down to Rs 40, the same Rs 10,000 investment will fetch about 250 units,” Bhatt said.

He added that if the market later recovers and the NAV rises to Rs 60, the investor will receive about 167 units for that month’s investment.

“This process is called rupee cost averaging. When markets fall, investors accumulate more units at lower prices. When markets recover, the higher unit holding helps create better long-term returns,” Bhatt explained.

Example: Rs 5,000 SIP during a volatile phase

Consider an investor investing Rs 5,000 every month through SIP in a mutual fund.

• Total investment: Rs 15,000
• Total units accumulated: about 308.33 units
• The average cost per unit comes to around Rs 48.65 (Rs 15,000 divided by 308.33 units).

Experts say this shows how SIP benefits from volatility because investors buy more units when prices fall and fewer units when prices rise, helping reduce the overall cost of investment.

According to Bhatt, volatility — which often worries investors — can actually benefit SIP investors who continue investing regularly.

“Down markets provide an opportunity to accumulate more units at lower prices. Over time, this helps investors build wealth as markets move higher,” he said.

Now consider an investor who invests Rs 5 lakh as a lump sum in a mutual fund when the NAV is Rs 50.

At this price, the investor will receive:

Rs 5,00,000 ÷ Rs 50 = 10,000 units

If market volatility pushes the NAV down to Rs 40, the value of the investment will fall to:

10,000 units × Rs 40 = Rs 4 lakh

This illustrates how lump sum investments can face short-term declines when markets fall soon after the investment.

However, if markets recover later and the NAV rises to Rs 75, the investment value will increase to:

10,000 units × Rs 75 = Rs 7.5 lakh

This means the investor would make a gain of Rs 2.5 lakh on the original Rs 5 lakh investment. Experts say this example shows that lump sum investments can deliver strong returns if markets move higher after the investment.

According to Rustagi, lump sum investing works best when investors deploy money during market corrections or at the beginning of strong market rallies.

“Lump sum investments can benefit significantly if markets rise after the investment. However, predicting the right time to invest is difficult, which is why many investors prefer staggered investments through SIP,” he said.

Experts say historical market data suggests that both SIP and lump sum investments can deliver similar outcomes over long periods. Bhatt said long-term equity market returns in India have broadly remained around 11–12 per cent annually over the past three decades, though returns vary across different market cycles.

“If we look at long-term data between 1995 and 2025, the average annual return from equities is roughly around 12 per cent. This is broadly similar whether investments were made through SIP or lump sum over long investment horizons,” he said.

He noted that SIP tends to perform better during volatile or sideways markets, while lump sum investments benefit more during strong upward trends. “There is no clear winner between SIP and lump sum investing. Both strategies work well in different market phases,” Bhatt said.

Market experts believe investors should not rely on only one investment approach. Instead, a combination of SIP and lump sum investing can help them benefit from different market conditions.

Rustagi said investors can continue SIPs for regular investments while deploying lump sum funds when they receive bonuses, incentives or other large cash inflows. “A combination of SIP and lump sum investing works well because it allows investors to benefit from different market cycles while reducing the risk of trying to time the market,” he said.

He also advised investors to follow proper asset allocation and maintain a diversified portfolio. “Equity should remain an important part of long-term portfolios because it has the potential to generate returns that beat inflation. Investors should align investments with long-term goals and continue investing in a disciplined manner,” Rustagi added.

Experts say that instead of worrying about short-term volatility, investors should focus on consistency, diversification and long-term financial planning to create wealth over time.