From Volatility to Stability What happens when you stick with your SIPs?

Investing in the equity market often feels like a rollercoaster of emotions (as discussed in our previous Weekend Bytes). Many investors tend to get intimidated by market volatility owing to which they withdraw from the market temporarily (by pausing their SIPs) or permanently for a sufficient period (by cancelling their SIPs).

Volatility is not new to the Equity markets. We have seen the market go through various phases.

Longer Investment Horizons have been rewarding despite Volatility

Consider the performance of HDFC Flexi Cap Fund vs its benchmark Nifty 500 TRI. As can be seen from the graph, market volatility was present across the years. The scheme was able to beat its benchmark amid the uncertainty following these events. This suggests staying invested with a chosen fund (based on investor risk appetite, investment constraints, etc.) and not being affected by market events helps see a growth in investment value

HDFC Flexi Cap Fund NAV is up ~192 times since inception (January 01, 1995) till April 30, 2025 vs ~35 times for benchmark NIFTY 500 TRI during the same period.

Disclaimer: ^Past performance may or may not be sustained in the future and is not a guarantee of any future returns. HDFC AMC/Mutual Fund is not guaranteeing or promising or forecasting any returns. **As on April 30, 2025. The above returns are of regular plan - growth option. In view of the individual circumstances and risk profile, each investor is advised to consult his / her professional advisor before making a decision to invest in the Scheme. Historical performance indications and financial market scenarios are not reliable indicators of current or future performance. Returns greater than 1 year period are Compounded Annualised (CAGR). Load is not taken into consideration for computation of above performance(s). Different plans viz. Regular Plan and Direct Plan have different expense structure.

Adopting an SIP route is ideal too!

Helps overcome market volatility fears:

The SIP path focuses on consistent investments made at regular intervals without considering the state of the market at that point in time. This way of investing deters investors from getting affected by prevailing market conditions.

Market timing becomes irrelevant:

No one can accurately time the markets each and every time. SIPs remove this uncertainty by spreading investments across a broader time horizon. This helps in reducing the risk of a market timing prediction going wrong.

Opportunity in bear markets:

SIPs continue purchasing units across varying market conditions – buying more units at lower prices during downturns. This can lead to improved returns when looked at from a long-term perspective.

Consider a monthly SIP of ₹ 10,000 in HDFC Flexi Cap Fund. Investment is assumed to be made at the start of each month. Investment period – Fund Inception (January 01, 1995) till April 01, 2025.

The SIP investment has grown to a value of ~₹20.03** Cr for a cumulative investment amount of ₹36.4 lakhs.

Disclaimer: ^Past performance may or may not be sustained in the future and is not a guarantee of any future returns. HDFC AMC/Mutual Fund is not guaranteeing or promising or forecasting any returns. **As on April 01, 2025. The above returns are of regular plan - growth option. In view of the individual circumstances and risk profile, each investor is advised to consult his / her professional advisor before making a decision to invest in the Scheme. Historical performance indications and financial market scenarios are not reliable indicators of current or future performance. Returns greater than 1 year period are Compounded Annualised (CAGR). Load is not taken into consideration for computation of above performance(s). Different plans viz. Regular Plan and Direct Plan have different expense structure.

Below is an illustration showcasing that continuing the SIP despite market events has proven to be beneficial over long term. Consider a monthly SIP of ₹10,000 in HDFC Flexi Cap Fund since inception till the date of each of these events. As can be seen, the market value of the investment has seen a significant increase over a period of time. Hence, staying invested via SIPs could help enhance portfolio growth.

Source: MFI, Internal Calculations

Disclaimer: The above investment simulation is for illustrative purposes only and should not be construed as a promise on minimum returns and safeguard of capital. Investment is assumed to be made at the start of each month. Investment period – Fund Inception (January 01, 1995) till the market event date considered in the table below for each event. Net Asset Values (NAVs) for the start of each month closest to the market event date are considered for calculation of Market Value. Cumulative Investment and Market Value are considered from Fund Inception to Market Event Date under consideration

Conclusion

Similar to how an Electrocardiogram (ECG) features its ups and downs to ensure a person is in good health, healthy Equity Markets go through their own share of ups and downs. Equity markets come with their own share of volatility. Market uncertainty does not warrant cancelling SIPs. SIPs are done bearing the premise that markets will experience volatility.

In volatile markets, SIPs act as a stabilizing strategy – helping investors stay consistent, incorporating rupee cost averaging, and helps in removing the uncertainty surrounding market timing predictions.

Over a long-time horizon, volatility decreases suggesting that investors who continue their SIPs need not worry about volatility impacting their portfolio. The way we nourish ourselves daily by consuming nutrients, proteins, etc, it is essential to nourish our investments regularly (say, with SIPs) enabling us to achieve a healthy portfolio. This strategy will potentially lead us on our track of achieving our financial goals comfortably.

Investors can consider investing via SIP in HDFC Flexi Cap Fund basis the amount and frequency of SIP that they are comfortable with and as per their risk appetite and financial goals.