Daijiworld Media Network – Mumbai
Mumbai, Jul 9: Amid ongoing market volatility, financial experts have advised investors to choose their investment strategy based on market conditions rather than assuming one method is universally superior.
While both Systematic Investment Plans (SIPs) and lump sum investments remain popular options for mutual fund investors, experts say each has its own advantages depending on the direction of the market.
According to Rubina Singla, founder of Equitrust Solutions, lump sum investments generally deliver better returns when markets witness a sustained upward trend, as the entire investment benefits from the rally from the beginning.
In contrast, SIPs prove more effective during market corrections, bearish phases or periods of prolonged volatility. Since investments are made at regular intervals, investors purchase units at different price levels, helping lower the average cost through rupee-cost averaging.
Experts also emphasised that SIPs encourage disciplined investing by removing the need to time the market. Regular investments continue irrespective of market fluctuations, reducing the chances of emotional decisions such as delaying investments or panic-selling during downturns.
Singla noted that consistently investing at market lows is difficult even for experienced fund managers, making SIPs a practical option for most retail investors.
Echoing the view, Navy Vijay Ramavat, managing director of Indira Securities, said an investment of Rs 1.2 lakh made as a lump sum in the Nifty index a year ago would currently be showing a loss of around five per cent. However, investing the same amount through a monthly SIP of Rs 10,000 over the same period would result in a smaller decline of around two per cent, as purchases would have been spread across different market levels.
Ramavat advised investors to continue their SIPs during volatile periods and consider market corrections as opportunities to accumulate investments if they remain confident about India's long-term economic growth.
He added that investors opting for lump sum investments should also consider deploying their money in phases, as accurately predicting market tops and bottoms is nearly impossible.