SIP or stop? What smart investors should do in 2025's market volatility
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Q. Let's begin with Trump's move. The U.S. has imposed a 25% tariff on Indian imports. Do you see this as an alarm or an opportunity for SIP investors?
Chirag Muni:
While the 25% tariff sounds severe, markets haven't reacted sharply, partly because there's still a lack of clarity. The market did open lower but recovered quickly, possibly also due to the monthly expiry. In the long term, India's macroeconomic fundamentals remain strong. Our export dependency on the U.S. isn't significant enough to cause a massive dent. Preliminary estimates suggest that the GDP impact may be around 0.2%–0.3% if the full tariffs are enforced.
Also, there are talks of penalties related to India's continued imports of Russian oil, but these are still unconfirmed. Overall, from a 3–5 year perspective, India's outlook remains positive. So, market dips should be seen as an opportunity rather than a reason to panic. It's a good time to accumulate on dips.
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Should Investors Continue Their SIPs?
Q. Some investors are panicking and considering redeeming mutual fund investments. Should they hold or exit? And what about continuing their SIPs?
Chirag Muni:
If you're already invested, stay put. Rebalance only if your equity exposure is above 75–80%. If you're between 60–70%, there's little reason to worry.
As for SIPs — absolutely continue. SIPs work because of
rupee cost averaging
. When markets fall, you get more units; when markets rise, fewer. This naturally reduces your average cost per unit.
For example, let's say you started an SIP in January investing ₹10,000 monthly. If the NAV fluctuated between ₹9 and ₹13, your average cost would still be favorable compared to investing a lump sum at a peak.
Is This a Good Time to Start an SIP?
Q. Should new investors start an SIP now or wait for a dip?
Chirag Muni:
Timing the market is tough. We did a study over the past 25 years, even if someone invested at the peak of each month, they earned ~11.19% returns. Those who invested at monthly lows got ~12.65%, and a disciplined mid-month investor earned ~11.84%.
So, the difference isn't significant. If you have investable surplus, start now. Waiting rarely helps in the long run.
Why Step-Up SIPs Work Wonders
Q. What's your view on step-up SIPs in the current environment?
Chirag Muni:
Step-up SIPs are incredibly effective and often underutilized. Let's say a 25-year-old starts a ₹5,000 SIP and continues for 35 years — they might build a corpus of ₹3.5 crore. But if they increase the SIP by 10% annually, the corpus could grow to ₹9.4 crore!
Even a ₹25,000 SIP can become ₹17.5 crore over 35 years, but with a 10% annual step-up, that corpus can grow to ₹47 crore. So yes, step-up SIPs are a powerful way to grow wealth over time.
Does SIP Date Really Matter?
Q. Investors often wonder... which date of the month is best for SIPs?
Chirag Muni:
We looked at 25 years of data and tested SIPs started on every date of the month. The return difference between the best and worst-performing dates was just 0.15%. So, the date doesn't matter. What matters is consistency. Pick a date you're comfortable with and stick to it.
SIP vs. Lump Sum: Which Is Better?
Q. Do SIPs outperform lump sum investments?
Chirag Muni:
Yes, especially in volatile markets. In 20 out of 24 calendar years, SIPs offered a better average entry cost than lump sum investing. Over the last 10 years, SIPs outperformed lump sum in 90% of cases.
Rupee cost averaging helps navigate volatility effectively — making SIPs the better choice for most retail investors.
Ideal Investment Time Frame for New SIP Investors
Q. What's an ideal investment horizon for SIPs?
Chirag Muni:
A minimum of 3–4 years is essential. Over three years, 90% of SIPs deliver positive returns. If you hold for five years, the probability of 10%+ returns goes up to 85%. For 15 years, it becomes 95%.
Also, even if the first year shows negative returns, holding on for three more years often delivers 11–12% CAGR. So patience and discipline are key.
Is It Time to Review and Rebalance SIPs?
Q. Given current domestic and global uncertainty, should investors review or rebalance their SIPs?
Chirag Muni:
Absolutely. While SIPs are automated, reviewing your portfolio annually is important. Evaluate scheme performance, asset allocation, and market cap exposure. If a scheme underperforms for a long time or your allocation becomes skewed, consider rebalancing. Regular monitoring is essential for long-term success.
Large, Mid, or Small Cap: What Works Best?
Q. Where should SIP investors focus: large, mid, or smallcap funds?
Chirag Muni:
Largecaps are less volatile, but mid and smallcaps offer higher return potential over longer horizons. From 2014 to 2024:
Largecap (Nifty 100):
Avg return ~12.6%
Midcap:
Avg return ~16.8%
Smallcap:
Avg return ~14%
If you have a 5+ year horizon, a higher allocation to mid and smallcaps can make sense. Diversify across market caps for balanced growth.
Ideal Market Cap Allocation Today
Q. What's a good market cap allocation mix for current conditions?
Chirag Muni:
Right now, a balanced allocation could be:
Largecap:
55%
Midcap:
22–23%
Smallcap:
~20%
This mix offers relative stability with growth potential.
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