Geopolitical tensions can trigger sharp market corrections, often leaving systematic investment plan (SIP) investors wondering whether to stay invested, pause their contributions, or increase their allocations while valuations fall. While such periods can be unsettling, market history suggests that disciplined investors who continue investing through volatility can benefit from lower prices and the eventual recovery.
Says Chirag Muni, executive director, Anand Rathi Wealth: “We often see that during times of geopolitical crisis, investors tend to panic looking at the market fall and begin questioning whether they should continue investing or wait for markets to settle. While such events can create sharp ups and downs in the short term, history shows us that these falls are temporary and do not change the long-term direction of the market.”
Investors should remember that market volatility is a normal part of equity investing, and reacting to every global headline often does more harm than the event itself. The focus should remain on the long-term investment strategy rather than on short-term uncertainty.
Says Muni: “If we look at past geopolitical events, we can see that these major conflicts have been temporary where Nifty 50 has fallen by around 5 per cent on average and recovered a little in over a month. If we look at normal market volatility as well, we can see that market ups and downs are normal.”
He adds: “Since 2001, Nifty 50 has seen an average peak-to-trough correction of around 18 per cent every year, with the next three-year return at 20 per cent and next five-year return at 17 per cent, showing that markets eventually recover to its previous highs.”
SIPs also work fundamentally on market movements, where when markets fall, the same monthly investment buys more units. Those additional units are accumulated at lower prices and participate fully when markets recover, which has also translated into better outcomes over time.
“If we look at 52 instances since 2000 where Nifty delivered flat returns over two consecutive years, lump sum investments generated an average return of -6.71 per cent, while SIPs still delivered an average return of 2.12 per cent. In fact, SIPs outperformed lump sum investments in 96 per cent of these periods. This proves that consistent and disciplined investing rewards investors over the long term,” says Muni.
Some investors even feel that when they see negative SIP returns, it is better to pause their SIP and wait for a better time to continue. But if we look at instances where a one-year SIP investment in Nifty 50 generated negative returns, we see that the next 4-year return turns positive in the range of 12-13 per cent. Hence, the biggest advantage of an SIP comes during periods of market falls, not when markets are making new highs.
Investors should, therefore, continue their SIPs and avoid reacting to any short-term market movements. Market corrections have always tested investor patience, but they have also rewarded those who stayed disciplined. Long-term wealth is built not by avoiding volatility, but by continuing to invest through it.
