SIP Vs SIP + Buying Market Dips: A Reality Check

Investors are often given two pieces of advice while investing in mutual funds through systematic investment plans (SIPs). The first is to invest regularly, ignore short-term market noise, and let compounding do its work. The second is to take advantage of market dips and invest more when prices fall.

For many investors, the natural response is to combine the two strategies—continue a monthly SIP, while topping them up by buying the dips.

But does that combination actually improve outcomes in a meaningful way, or does it merely add complexity and emotional effort without materially better results? In other words, does market timing, even when done in a disciplined and limited manner, genuinely enhance long-term returns over a simple SIP?

While intuitively buying market dips should add to the returns, our calculations showed some shocking results. Let’s explore.

Returns Comparison

To answer the key question of which is better, we compared a plain monthly SIP with a structured SIP plus buying dips strategy using long-term data from the Nifty 500. Nifty 500 is a broad index that represents the largest 500 companies of the country.

The intent was not to test clever timing or perfect foresight, but to examine what happens when an investor follows rules that are realistic, repeatable, and free of hindsight.

Simple Monthly SIP: The base case is straightforward. It represents the simplest and most widely followed long-term equity investment strategy.

An investment of Rs 10,000 made at the start of every month in Nifty 500 for 15 years added up to a total contribution of Rs 18 lakh. By December 2025, this grew into a portfolio worth Rs 54.35 lakh. The annualised return, measured using extended internal rate of return (XIRR) to account for the timing of cash flows, came to 13.55 per cent (see SIP vs SIP + Buying The Dips: Who Wins In The Long Term?).

XIRR is simply a way to calculate annualised returns when your money does not go in or come out at once. In real life, we invest through SIPs, redeem partially, pause investments, restart, make occasional lump sum investments, and so on. XIRR helps calculate the real returns after taking into consideration all these inflows and outflows.

A plain SIP over a 10-year horizon had a total investment of Rs 12 lakh, which grew to Rs 25.46 lakh, with an XIRR of 14.39 per cent.

SIP + Buying Dips @ 5%: All the assumptions remain the same, except for an investment of Rs 50,000 during each market dip of 5 per cent from the previous high, measured on a monthly basis (see Methodology).

Over a 15-year period, when Rs 50,000 was added to the SIP for each 5 per cent dip in the market, the total amount invested rose to Rs 23 lakh, including the full Rs 5 lakh deployed during market corrections. The final portfolio value increased sharply to Rs 84.04 lakh.

Now, this higher corpus is a result of additional investments rather than a proportionate improvement in return efficiency, as the XIRR came to 13.54 per cent, which is broadly in line with the plain SIP return.

Over the 10-year period, when dip-buying was added using a 5 per cent fall rule, the total investment rose to Rs 17 lakh, and the final portfolio value rose to Rs 40.16 lakh, and XIRR marginally rose to 14.40 per cent.

SIP + Buying Dips @ 10%: Again, all the assumptions and rules remain the same, except an investment of Rs 50,000 during each market dip of 10 per cent from the previous high, measured on a monthly basis.

For the 15-year period, in this case, the final portfolio value rose to Rs 83.25 lakh, while the annualised return improved to 13.69 per cent, slightly higher than the SIP-only return of 13.55 per cent.

For the 10-year period, the outcome improved a little more meaningfully. Here, the final portfolio value rose to Rs 37.66 lakh, and XIRR rose to 15.53 per cent compared to 14.39 per cent under the plain SIP. While this requires patience and discipline, the improvement is clearly visible in the annualised returns, and not just the final corpus size.

Overall, our analysis shows that combining an SIP with buying the dips does increase the final wealth (though the investment amount also increases), but it does not dramatically improve long-term returns for most time periods. However, in some cases when markets go through deep, sharp corrections, and quick recovery, the gains may be meaningful.

Why Buying Dips Doesn’t Lift Returns Much?

At first glance, the results seem counter-intuitive. Buying more when markets are down should, in theory, improve returns. However, our calculations show that the impact on annualised returns is limited, with XIRR moving only marginally in most cases.

The reason lies in how XIRR is calculated. It reflects not just how much money is made, but also the timing of investments. If corrections happen late during the SIP period, the late lump sum deployments will compound over a shorter time period and will have a smaller influence on long-term annualised returns.

Buying the dips improves the size of the portfolio but does not necessarily improve the efficiency with which capital is compounded.

Industry experts validate the analysis results. “Multiple studies done using historical values have shown that SIP plus buying the dips show minimal difference in returns in most of the cases,” says Gautam Kalia, head of investment and solutions, Mirae Asset Sharekhan.

The Exceptions: There are some cases where SIP plus buying the dips can work: during deep corrections, says Niharika Tripathi, head of products and research, Wealthy.in, a wealth management platform. “The correction must be followed by strong recovery (i.e. during “V-shaped” recovery phases),” she says.

Nikunj Saraf, CEO, Choice Wealth agrees. “Corrections like the 2020 crash rewarded bold top-ups with quicker rebounds.”

The results also matter depending on the category of mutual fund you choose. “Mid- and small-cap funds are supposed to show better results when buying more at dips, compared to large-cap funds which are relatively stable,” says Tripathi.

What Should You Do?

While the analysis assumes perfect discipline, tactical allocations are easier said than done, say experts.

In most cases, says Tripathi, the result is not that miraculous considering the difficulty and absurdity of meeting all the assumptions. “Timing the market and reacting to it every time without falling prey to any behavioural trap is nothing but a miracle,” she adds.

Tripathi believes that ideally no one should try SIP plus dip buying strategy, as the result is not worth the effort in the long run.

Saraf agrees: “For 80 per cent of us mortals, it’s peace of mind masking behavioural biases—holding cash feels smart until rallies leave you behind. Pure SIP wins for sleep-at-night simplicity.” So, steer clear if you’re new, conservative, or tied to goals like children’s education.

However, this is not to say that buying dips is completely pointless. If the goal is to maximise absolute corpus size, dip-buying can help savvy investors. “Aggressive souls with 5-plus years of experience with spare cash, and stomachs for swings who spot volatility as opportunity, can go for it if they feel so,” says Saraf.

But they should make sure, it does not jeopardise their asset allocation, cash flow and goal planning in any way. Says Tripathi, “Be prepared, as a sharp correction need not be immediately followed by an equal rebound. So, the investor needs to wait longer to see their money grow.”

The broader lesson is a familiar one, but worth repeating. Over long horizons, consistency matters more than cleverness. Our study also reveals that a disciplined SIP captures most of the equity market’s long-term return with minimal stress and minimal scope for error. “Regular investing ensures continuity and harnesses compounding, while waiting for dips introduces behavioural biases,” says Kalia.

In case you are looking forward to investing that extra cash saved in your bank account, experts suggest opting for step-up SIPs.

A step-up SIP is a feature that lets you automatically increase your SIP contributions at regular intervals, typically every year. Instead of sticking to a fixed amount each month, your SIP contribution gradually increases by a pre-set percentage or amount over time.

“Investors can use the step-up SIP tool to increase their investments as their income grows. SIPs are designed to automate investing and thus overcome the challenge of timing the market,” says Abhishek Tiwari, CEO, PGIM India Asset Management.

Tripathi agrees and explains that the reason is quite simple: money kept idle “waiting for a correction” might miss out on growth, whereas money put into the market (via SIP) starts working for you immediately.

“While dip buying may offer psychological satisfaction and a small incremental benefit, the real driver of wealth creation is consistency and longevity,” adds Kalia.

To conclude, for most investors, as believed by the experts, the boring strategy—investing regularly, staying invested, and letting time do the heavy lifting—remains the most effective strategy.

Methodology

We used the Nifty 500 price index for analysis, with monthly data ending in December 2025. Dividends have been excluded. However, since both strategies are evaluated on the same basis, the relative comparison between them remains valid.

Since SIP in equities are suggested only if investors have a long time in hand, we evaluated the results along two long time horizons: a 15-year period from January 2011 to December 2025, and a 10-year period from January 2016 to December 2025. We have taken both the time periods for both the strategies: investing only in an SIP and investing in an SIP plus topping it up during market dips.

The SIP amount has been taken at Rs 10,000 per month and the amount deployed during market dips at Rs 50,000. Further, we took two scenarios of market dips—when it falls by 5 per cent and when it falls by 10 per cent—measured on a monthly basis from the previous all-time high. Only one such investment is allowed in any given month, and total additional investment is capped at Rs 5 lakh across the entire period. These constraints are important as they reflect the fact that most investors have limited surplus money and cannot deploy capital repeatedly during prolonged market declines.

avneet.kaur@outlookindia.com