2024 proved to be a volatile year for the markets. The NIFTY 50 index started the year low at around 21,000, but surged past its all-time high of 26,000 in September 2024, only to end the year at approximately 23,6441 after a steady decline. This volatility seems to have carried over into 2025, with the markets continuing to fluctuate.

In such an unpredictable environment, how can investors navigate this volatility? Many might think that the solution lies in timing the market—after all, timing is often touted as key to success in many aspects of life. As the saying goes, "The right timing can make all the difference."

However, when it comes to investing, attempting to time the market is a fallacy—like spotting an oasis in the desert but never quite reaching it. Timing the market is a time-consuming, rigorous, and ultimately an unreliable strategy. It is unlikely to deliver results, simply because markets move based on a vast array of unpredictable factors—economic data, geopolitical events, investor sentiment, and more; which most of us cannot predict accurately.

So, what works in the face of volatility? Long-term investing has always been the answer for equity investing. It is about holding your ground through market fluctuations, trusting the process, and focusing on the bigger picture.

But there is another investing strategy that complements long-term investing beautifully: SIP (Systematic Investment Plan).

Key features of SIP investing are:

SIP means investing pre-determined sums of money, at pre-determined intervals into a fund or funds of your choice. This method has some standout features that help investors navigate market volatility with confidence and ease.

1. Builds Discipline

   One of the most important benefits of SIP is that they encourage regular investing. By setting up an e-mandate, you ensure that you do not miss an instalment, even during market dips. This consistency helps you stay committed to long-term goals and smooths out the impact of short-term volatility. SIPs, in a way, force you to invest regularly, which is key to success in the equity markets.




2. Rupee Cost Averaging

   Another key feature of SIP is rupee cost averaging. This strategy allows you to benefit from market fluctuations by buying more units when prices are low and fewer units when prices are high. Over time, this lowers the average cost of your investment, which can be advantageous when the market is volatile.

Let us break this down with an example: This is the NIFTY 50 TRI growth chart for 10 years, from January 1, 2015, to December 31, 2024.

We take two investors

Investor A – Began an SIP of Rs.10,000 on 1st January 2015 and continued this SIP for 10 years irrespective of market fluctuations
Investor B – Also started an SIP of Rs.10,000, but tried to time the market. Whenever he saw market dips, he panicked and stopped investing. He resumed his SIP only when he felt the market had bottomed out. This happened three times during the 10-year period.

This is how their investments looked at the end of 10 years:

• Investor A stuck to his plan and consistently invested.

• Investor B missed out on opportunities by stopping his SIP during market dips, which ultimately hurt his long-term returns.

While Investor B invested Rs.1,80,000 less than Investor A, he missed out on returns worth more than 2.5 times that amount! This shows just how costly attempting to time the market can be.

The Power of Consistency with SIPs

SIPs help you remain consistent, which is far more important than trying to time the market. Market timing might seem tempting, but it is difficult and requires a near-supernatural ability to predict market movements. It is not only time-consuming but also unlikely to produce the results you want. On the other hand, SIP let you invest regularly, regardless of market conditions, and let the power of rupee cost averaging and compounding work for you.

The Bottom Line

Ultimately, timing the market does not work. The true money-maker is consistent SIP investing over the long term. SIPs allow you to ride out volatility, stay disciplined, and benefit from rupee cost averaging, making it a far better approach for most investors.

As a famous quote goes, “The stock market is a device for transferring money from the impatient to the patient.” Stick with SIPs, stay patient, and let your investments grow over time.

Past performance may or may not be sustained in the future. SIP does not assure a profit or guarantee protection against loss in a declining market. The illustration mentioned above is not based on any judgements of the future return of the debt and equity markets / sectors or of any individual security and should not be construed as promise on minimum returns and / or safeguard of capital.

Sources:
1. https://www.nseindia.com/reports-indices-historical-index-data - NIFTY 50 prices between 1st January 2024 and 31st December 2024

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.