SIP vs Lumpsum: Which strategy works best for you?

I believe this key insight is crucial when dealing with equity market volatility. Other asset classes, like gold and real estate, do not share this characteristic.

The point I wish to convey is that unless you believe human progress driven by ingenuity and innovation is coming to an end, equity will continue to increase in value over time.

To benefit from this growth, you just need to be clear about your investment time frame and exercise patience to reap the rewards.

In the end, inefficient companies are punished, while efficient ones that leverage ingenuity and innovation continue to thrive. Markets go through this churn over time, and active managers also churn their portfolios to include strong companies in line with their fund's mandate. Investors, therefore, benefit by staying invested.

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Timing the market? Think again.

Let’s trace the growth of Indian markets and how they have rewarded investors despite intermittent crashes. We examined the performance of the Sensex when COVID-19 hit the world. As nations went into lockdown, equities were battered.

On March 23, 2020, the Sensex closed at its lowest point of 25,981. By the end of 2020, the market had recovered by 84%, and in just a couple of months, it had doubled (up 101%) by crossing the 52,000 level on February 15, 2021. The Sensex had doubled in 329 days, despite witnessing a drawdown of -38% in CY2020.

While the above reflects a short period, it highlights that, instead of trying to time the market, staying invested for the long term is