Equity Mutual Fund Investments Via SIP
Generally, most of the investors park their money in equity mutual funds only, why because of equity funds offer more than six types of benefits to the investors. Equity schemes offered tax benefits, convenience investment methods, extra income in terms of dividends, and investors can start to invest with a small amount, potential to generate high-level returns. Moreover, it also offers to minimize the risk in the overall portfolio.
But, equity funds are risky especially in the short-term. Investors should always stick with a range of at least five to seven years. Here is a question about investing in equity mutual funds via SIP. What will happen to invest in Equity schemes by using the SIP investment method? let us check.
It is clear that the advice is for investors who invest in equity schemes for 5-7 years, but that is not for investors who invest via SIPs.
Short Term Investments (Investing In Equity Mutual Funds Via SIP)
As of the source, the last installment of SIP investments is just one month old in the market. The only first installment has completed as five or seven years. Note that “investors who took out the money in a short time are not wise at all,” said a source.
A source added that five to seven years of investment range might make good returns, but for SIP investments it is too short. Since most of Systematic Investment Plans installments would not complete in three years.
Let us assume that, ‘A’ invest Rs 1,000 in a mutual fund and take out capital after five to seven years. In this case, he can say he has invested the money for five or seven years. But, if A is investing in SIP of Rs 1,000 for five or seven years, yet small changes should happen. In the fifth year, only the first SIP would complete five years. However, half of your SIPs would not have even complete three years.
According to the source, there is a theory of a fixed period. It means investors have a buffer time before they reaching the endpoint (goal).
How To Handle SIP Investments?
A certified mutual fund counselor said that the basic rules of asset allocation should apply to direct investors. As of the source, the asset allocation will guide any investor. This is not just a statement. When one can choose seven years, they have set a plan for when to hold how much equity exposure. Moreover, they also have a chance as to when to stop investing and when to book profits. These options should be planned ahead of time.
While investors can not stop their SIPs at once and take out the money. They will end up paying extra on SIPs, said by a financial expert.
In this case, ‘A’ person seeking to make a certain amount in 10 years. For suppose, A have 70-30 percent in equity and debt in three years and move to 50 percent equity in five years. The equity exposure decrease with time depends on investors’ goals. At the end of seven years, ‘A ‘stop SIPs in his schemes. This gives him the last investment enough time in the market. It also protects his from any market downturn when A near his goal.
A certified financial expert says, As of the SIP investment norms, when a person suddenly closes his SIPs at the end of the fifth year or 10th year, he pays taxes/exit loads on the installments that did not complete a year. So, he should have a buffer of at least a year after he stops his SIP.
Disclaimer: This post is just about the information. The views and finance tips are given in this section are the expert’s own and not those of the website or its management. MF investments are set to market risk. Please consult your financial advisor before invest.