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More on Systematic Investment Plan (SIP) and Micro SIP
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| (Have you read the earlier article on SIPs? Go ahead and read "Systematic Investment Plan (SIP) - A rupee a day, keeps worries away") |
How to invest in a Systematic Investment Plan (SIP)
Now let’s address another important question: How many SIPs should you have? Should you stick to a few good MF schemes, or you should invest in more schemes if you have more money to spare?
In my opinion, you should invest in 2-3 good diversified equity MF schemes, irrespective of the amount that you can invest. If you have Rs. 3,000 to invest, put Rs. 1,000 each in 3 good diversified equity MF schemes. If you have Rs. 10,000 to invest, put Rs. 3-4,000 each in 3 good diversified equity MF schemes!
This can be slightly changed for people who don’t mind taking a little more risk: If you fall in this category, you should start with an SIP in a good diversified equity MF scheme, and you can invest in a good mid-cap focused MF scheme as well.
(Want to know more about classification of stocks? Please read "One size doesn't fit all")
People having an even higher tolerance for risk can invest in sector funds or thematic funds (I personally do not recommend this). There are mutual fund schemes focusing on a particular sector of the market. For example, it can be a scheme focused on the Power sector, or the Infrastructure sector, or the Information Technology sector.
Here is a list of some good equity diversified MF schemes:
- Reliance Vision Fund
- Franklin India Prima Plus Fund
- DSPML TIGER Fund
- SBI Magnum Contra Fund
Here is a list of some good mid and small cap focused MF schemes:
- Reliance Growth Fund
- Franklin India Prima Fund
So, as I always say, Happy Investing!
The original query from the user:
I would like to ask you a few questions on demystifying a few facets of MF investing relating the current investment scenario in India.
(A) Firstly, investing via SIP v/s NON-SIP or lumpsum.
SIP was sold as investment methodology which could overcome the up and downs of market and outperform lumpsum investments. However, off late the information seeping through is the lumpsum investments are better than SIPs
(B) What is the minimum SIP amount one can invest in a fund. Ideally, AMC's are looking for SIPs of Rs. 1000 or above, but off late quite a few SIP schemes are being offered of lower denominations. However, the information for which is scattered and not readily available.
(C) And coming to the question which led to asking the earlier questions. Asset allocation in SIP
E.g. If a person has a monthly capacity to invest Rs. 5000 in SIP - age 32, how should one go about distributing the amount. Should it be
(i) Rs. 5000 in a 5 start equity fund such as HDFC Equity Fund or
(ii) Rs. 1000 in five, 5 star Equity Funds or
(iii) Rs. 500 in ten, 5 start Equity Funds
and so on and so forth
The asset allocation also becomes complex as the Entry-Exit loads, Holding period, etc. are different for the different segments of amounts
In conclusion, can you please comment towards small to medium investors having a monthly capacity to invest up to Rs. 10000/-, (a) how one should invest in MF - lumpsum vs/ SIP and (b) the amount allocation strategy keeping in mind the various loads and loopholes
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- Dividend Yield - A better alternative to FDs
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Note: Please treat the opinion expressed here as a broad suggestion. Please consult your financial planner / investment advisor before making any investment decision.
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Jun 28, 2008
Jul 03, 2008
Jul 28, 2008
mainly, my query is that with bless from god i will become dad in next november.
i want to invest in sip scheme for long time. something around rs. 2000 p.m. so, i can save a better amount for my child's future education.
i also want insurance cover wiht that.
so, please advise me for the best availbale schemes, conatact no., its benefits & others & oblige
Thanks for the compliments!
Congratulations to you - I am sure these would be very exiting days for you!
And congratulations again to you - for thinking very clearly, and planning to invest from the birth of your child itself - I just wish everyone would think as smartly as you!
I would suggest that you separate investment and insurance. Although there are SIPs that come with insurance cover, I feel that you should go in for SIP and insurance separately.
MF schemes offering insurance are very limited, so it would severly limit your choice of MF scheme.
It would be better to invest in a regular diversified equity fund. Since you want to invest for the long term - which is very good - you can invest Rs. 1000 in two funds each.
You can opt for any existing diversified equity fund with a good track record - a fund which has given a consistently good return over the last 3 or 5 years.
A good website to check out funds would be http://www.valueresearchonline.com
You can also do your research on many finance websites on the internet.
As far as insurance goes, I suggest you buy term insurance plan. This is available from all insurers, and would provide you insurance at a very low cost.
(To know more about term insurance, please read "Term Policy Is The Best Policy")
This way, you would get enough insurance, and would be able to keep investment and insurance separate!!
Once again, congratulations. And happy parenting!!
Aug 08, 2008
I am not sure if I understand your question correctly...
Can you please clarify?
Thanks.
Nov 26, 2008
Now a days market is continuously fluctuating and so I want to quit from SIP. Pl. inform the benefits & drawbacks
Sathy Anil
I know this is a question troubling most investors these days.
That's why, I have written an article for the same - please check out "Do you have an SIP? Don’t stop it!".
Happy investing!
Feb 12, 2009
i am looking out for gud childrens plan which will take of
major events like childs, health, education, marriage.
i am not sure whether to go for a regular childerns plan or go in for a sip kind of investment in mutual funds.
please suggest me the best option.
I personally believe that SIPs in MFs are a better choice. The best part is that you can choose from almost infinite fund schemes!
However, planning for your kids' furture using SIPs takes a lot of descipline, and many of us find it quite difficult.
Dedicated children's plans come handy there - you pay fixed premiums for years, and they manage everything else. Of course, the trade-off is that you get less control.
So, you need to depending on how desciplined you can be!
Please find my requirements and suggest the better option to invest.
1) I have taken term insurance(Birla sun life dream plan) for exclusive insurance purpose.
2) I just entered into 30 and am a risk taker.
3) I wish to go for sip but I am interested in tax free returns.
Can you suggest which option such as sip kind of investment in mutual funds, sip kind of investment in ELSS, something like that. I hope your answer will be an answer to many.
First of all, congratulations for separating insurance from investment, and buying term insurance. Most people are unable to make this distinction, and suffer financially due to this.
When you invest in SIPs, you have a lock-in of 3 years. Which means that all gains would be long term gains, and there would be no income tax on it. So, this satisfies your condition.
(Please read "Long Term and Short Term Capital Gain - Income Tax Calculation" for more on taxation on gains from stocks)
Now, we need to choose between ELSS MFs and regular MFs.
Both ELSS MFs and equity diversified MFs give more or less similar returns. However, if we consider the tax saving due to investment in ELSS (section 80C), the returns are much better from ELSS MFs.
(Check out "Saving Income Tax – Understanding Section 80C Deductions" to know how you can save income tax)
So, if you haven't maxed out your section 80C investment, ELSS would be a better option. Please keep in mind though that each installment of the SIP in ELSS MFs would have a lock-in period of 3 years.
If tax saving is not a consideration, equity diversified mutual funds would be better, because you have a much wider choice available in that space.
Happy investing!
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