Skip to main content

Invest in Mutual Funds SIPs for long term





While the best 10-yr SIP return from a diversified fund is 29.45% CAGR, the worst is just 7.6%; investors should review fund performance regularly

Should I start a systematic investment plan, or SIP , in an equity mutual fund and forget about it?

This is one of the most commonly asked questions by investors who want to or have put a portion of their regular income in equity schemes to meet various goals like buying a house, planning for child's education and overseas holidays. While financial advisors emphasise the importance of long-term investing, usually for 7-10 years, the `fill it, shut it, forget it' strategy might not work always.Wealth planners advise that investors need to review the performance of their investments regularly to ensure their money is working hard enough for them.

A study of 94 diversi fied equity schemes will tell you why keeping a tab on performance is important. Data compiled show of the 94 open-end diversified equity mutual fund schemes, for a 10-year SIP period, the best performer gave an annual return of 29.45% while the worst performer gave 7.6% returns. At less than 8%, the equity mutual fund has delivered lower returns than some long-term fixed deposits.


So, if `10,000 had been invested every m o n t h fo r 1 0 ye a r s i n U T I Transportation and Logistics, the best performing scheme, it would have grown to `43.16 lakh in a decade. Now, if the same amount was invested in a laggard like JM Equity Fund, it would have grown only to `17.26 lakh.


The study shows while it is impor tant to focus on investing in the long-term, it is equally crucial to pick the right product.


Out of 94 schemes analysed, 12 returned less than 10% on a compounded basis over 10 years. Though the number of underperformers is not high, it is still a reminder that winners of the past need not maintain their streak over a pe riod of time. This is relevant to sev eral investors today who have been sold equity mutual fund SIPs by dis tributors almost like a returns-as sured arrangement. Many financial planners show excel sheets where they assure you equity SIPs will earn 12-15% and you will reach your goal. Investors should do their own math, not blindly follow this as there is no guarantee of this return


A lot of the money flow into equity SIPs over the last three years have been driven by such expectations of retail investors.Monthly inflows into equity mutual fund schemes through SIPs, which were Rs 1,200 crore three years ago, have now swelled to Rs 4,000 crore. Wealth managers said investors could review their portfolios every six months.


If a scheme is underperforming its benchmark, it should raise a red flag


But, the six-monthly or yearly review may not work in every case. For instance, there are eq uity schemes that have underperformed for two or three years in a row but have caught up with the rest or even outperformed them over a five-year period. This is true in the case of schemes whose fund managers shuffle their portfolios the moment they see bubbles building up in sectors that are in vogue.


If investors continue to believe in the fund managers' conviction, they can continue to hold on to the investment, else switch out.







------------------------------------------
Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds

Top 4 Tax Saver Mutual Funds for 2017

Best 4 ELSS Mutual Funds to invest in India for 2017

1. DSP BlackRock Tax Saver Fund

2. Invesco India Tax Plan

3. Tata India Tax Savings Fund

4. BNP Paribas Long Term Equity Fund



Invest in Best Performing 2017 Tax Saver Mutual Funds Online

Invest Best Tax Saver Mutual Funds Online

Download Top Tax Saver Mutual Funds Application Forms


For further information contact Prajna Capital on 94 8300 8300

--------------------------------------------

Leave your comment with mail ID and we will answer them

OR

You can write to us at

PrajnaCapital [at] Gmail [dot] Com

OR

Call us on 94 8300 8300

---------------------------------------------

 

Popular posts from this blog

Equity investors should track market developments

The stock markets have been volatile over the last few days. They are in a sideways movement and trying to find the bottom after a fall of 20 percent a week ago. The market sentiments are not very positive at the moment and the recent developments are expected to dampen them further. Globally, governments and central banks are trying to cut rates and announce packages to improve business sentiments. These are some of the major developments in the markets last few month: A) Global On the global front, another large US bank went into a financial crisis. The US government took quick measures to avoid the spread negative sentiments in the markets. The US government announced a bail-out package and agreed to shoulder the losses on the bank's risky assets. China announced a large cut in interest rates and reserve ratio to boost the investor sentiments in the markets. Recently, the World Bank announced China's growth rate next year will come down to 7.5 percent. The European ...

Tax Planning: Income tax and Section 80C

In order to encourage savings, the government gives tax breaks on certain financial products under Section 80C of the Income Tax Act. Investments made under such schemes are referred to as 80C investments. Under this section, you can invest a maximum of Rs l lakh and if you are in the highest tax bracket of 30%, you save a tax of Rs 30,000. The various investment options under this section include:   Provident Fund (PF) & Voluntary Provident Fund (VPF) Provident Fund is deducted directly from your salary by your employer. The deducted amount goes into a retirement account along with your employer's contribution. While employer's contribution is exempt from tax, your contribution (i.e., employee's contribution) is counted towards section 80C investments. You can also contribute additional amount through voluntary contributions (VPF). The current rate of interest is 8.5% per annum and interest earned is tax-free. Public Provident Fund (PPF) An account can be opened wi...

Fortis Mutual Fund

Fortis Mutual Fund, a relatively new player, it is still to prove its case and define its position in the industry. In September 2004, it came onto the scene with a bang - three debt schemes, one MIP and one diversified equity scheme. And investors flocked to it. Going by the standards at that time, it had a great start in terms of garnering money. Mopping up over Rs 2,000 crore in five schemes was not bad at all. The fund house has not been too successful in the equity arena, in terms of assets. Though it has seven equity schemes, it is debt and cash funds that corner the major portion of the assets. Most of the schemes are pretty new, and the two that have been around for a while have a 3-star rating each. The last two were Fortis Sustainable Development (April 2007), which received a rather poor response, and Fortis China India (October 2007). Fortis Flexi Debt has been one of the better performing funds, after a dismal performance in 2005. It currently has a 5-star rating. None ...

Gold: It is safe & secure

RETURNS ON GOLD & ITS ETF’s RISE WHILE most of the popular asset classes are going through bad times, the yellow metal shines on. In fact, in the last one year, gold has given a return of more than 25% and currently trades at Rs 14,695 per 10 gm. Even gold exchange traded funds ( ETFs ) have appreciated substantially. Gold Gold Benchmark Exchange Traded Scheme ( BeES ) and Kotak Gold ETF have given more than 25% returns each in the last three months. Even as the equity markets have taken a hit with the Sensex losing around 46% in the last one year and real estate prices also witness a correction, investors’ preference has shifted to safe havens such as gold. On an average, most of the diversified equity mutual funds have fallen and real estate developers are offering discounts. Thus gold remains the safest bet. The appreciation in the gold prices is mainly due to its safe haven status. The key reason for gold to go up is lack of other investment opportunity. There is also a risk in...

Alpha - The relative performance

Alpha, the net performance of a component against the benchmark is an overlooked tool   Absolutely speaking, any bounce back now on markets should be the last for the year. We offcourse can be wrong and prefer to be judged on alpha (relative performance) as relative accountability is fine with us. According to Alpha India, the top outperformers in the weeks ahead should be Reliance Communications, Reliance Infrastructure, SBI, HDFC, ONGC, Larsen, Jaiprakash Associates, Maruti, Bharti and DLF. On the short side (reduce side), we have Ranbaxy, ACC, Sail, Tata Steel, Wipro, Tata Motors, Sun Pharma, TCS, M&M and Infosys.   Performance like everything follows the 80-20 rule, 80 per cent of your gains are going to come from 20 per cent of your portfolio. So why not give it a thought? The importance of alpha If alpha was so important, then why don ' t newspapers and websites publish it? Why alpha gets featured annually but not as intraday or daily event? Why don ' t we c...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now