Investors making long-term investments in mutual funds through SIPs are always worried about what will happen if the market starts falling during this period. SIPs are a unique way to get some protection against risks like market timing and volatility.
You can avoid market volatility by Rupee-Cost-Averaging, for this you have to invest regularly in mutual funds through SIPs. In this, you buy more units when the NAV is low and fewer units when the NAV is high. If the NAV moves both up and down during this time, your average price per unit is lower in the long run. For example, if you invest ₹1,000/- per month, you will get 100 units if the NAV becomes ₹10 and 200 units if the NAV becomes ₹5. If the market moves in both up and down direction, the average rate per unit will be lower in the long run which also helps in reducing the volatility of the return on your investment.
If you invest a lump sum amount, the number of units will not change throughout the investment period, but the value of the investment may fall with market fluctuations. If you keep your lump sum investment in an equity fund for a longer period (say, up to 7-8 years), such temporary slippage should not affect your returns as the market trend is generally upward in the long run. Stays on the side. It is more likely that you will end up with a much higher NAV than the NAV you started with.