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Can someone help me with understanding this long term SIP funda? I started investing(SIP) in MFs around a year and half ago but am a bit unclear on the long term concept.

When you say long term does it mean we continue to invest a small sum every month for lets say 6 years(am considering it as long term) or is it like you invest the monthly amount for a couple of years and stop after that, but don't withdraw/redeem the units. Let them stay there for another 4 years while they increase in value and switch the monthly investment to a different MF product meanwhile(3rd year onwards i.e.)?

Reason I ask is currently I am invested in 4 different funds(2 large caps, 1 balanced & 1 small cap) and the small cap fund(L&T emerging business fund) has been in red for almost a year now albeit now the red is a little less in % terms. Am unsure whether I should continue investing in that or should I stop it, leave the units as it is for next couple of years and switch the monthly amount to some other fund. please:

You have not mentioned names of all funds, hence cannot comment specifically for your funds. However as a general advice you should continue your SIPs. The last few months have seen a market correction so it is natural for your SIPs to be in the red. Do not panic. Since you are planning to invest for the long term, this period is in fact a boon. While the markets are down, you will gather more units of the fund for the same SIP amount. When market rises, this will benefit you as you will have more units accumulated during correction phase at low prices resulting in more gains.

As for the earlier part of your query, you can continue for as long as you wish to. You can even continue the SIP for 6 months. However the general consensus is to withdraw from the equity mutual fund and switch the amount to debt fund a year or 2 before you plan to use it for your goals. This will safeguard you against sudden crashes close to your goal date.

Hope this helps!

SIP funda is about inculcating a habit of regular savings. A significant percentage of mutual fund investors invest during a bull market and bail out during bear markets thereby suffering losses. Theoretically, SIP helps you avoid such a landmine. But then, many stop SIPs during bear market thereby messing up the returns.

You are supposed to do SIP investments till you retire. During this time, you can stop SIP in a particular fund or you can change the amount you invest in.

You pull out money from a mutual fund -

- after you retire (pull out just enough money every month to take care of expenses)
- if you need cash for down payment for purchase of house/car
- if you need cash for any other major expense.

To my knowledge, here is no mathematically precise definition of being invested in the "long term". It simply means that you stay invested in a particular fund/ market over a large number of years. Over these years, in a bull market you will see those stocks and your money showing significant returns. Whereas in a bear market, those same stocks will show poor/poorer returns. SIP is simply a means systematically investing small amounts month after month, and building a corpus which is deployed in the market by professional fund managers, so as to give you a return spread over your investment timeframe.

The idea of staying invested over several years (could be 10, 15 20, or a lifetime) and not being tempted to exit when the market is down, is to average out the losses and capitalise on the gains so that in the end, you have substantial returns to show against the money that you have invested.

Ideally, you should keep SIPs operative as long as possible so that you slowly build up a corpus of funds which you can use during your retirement years.

Of course, if a fund is consistently underperforming, and your money can be better deployed elsewhere, it is always possible and indeed, recommended to exit the underperforming fund and invest that money in a better performing fund/ scheme/ instrument.

Thanks. Infact that's the reason I increased my SIPs(the amount) from last month seeing the reds in order to accumulate more units.

Noted!!! Thanks for the inputs. Appreciate it :thumbs up

Hi.
I am having below SIPs using MFU –
1. Mirae Asset Emerging Bluechip Fund
2. Motilal Oswal Multicap 35 Fund
3. DSP BlackRock Equity Opportunities Fund
Now I am interested in investing a lump sum amount of Rs. 50000 in the HDFC Mid-Cap Opportunities Fund.
I need expert’s advice if I should go with this lump sum investment in the chosen fund. My risk profile is moderate and I will be fine with anything above 10% CAGR in the long-term (7 years+).

My portfolio is almost all Equity Mutual Funds so my observations are based on that.

You should regularly review your portfolio performance. If you find that your fund is regularly underperforming as compared to peers, you should exit at the appropriate time. There is no real consensus on this but 36 months should be sufficient to identify underperformance.

If you have a significant amount parked in the fund you wish to exit, you should open a Liquid Fund and first transfer the entire amount to that. You should then start a Systematic Transfer Plan (STP) from the Liquid fund to the new Equity fund that you have picked. This is less risky as compared to moving the whole amount from one Equity fund to the other in one go. An STP is basically an SIP and gives you the same kind of benefits. The STP should run for an average of 12-18 months. Don't bother taking this route if the corpus is small.

I recently cleaned up and simplified my portfolio and this is the route I took. Happy investing :D

It is great that you use MFU. I blog quite a bit on mutual funds. My suggestion would be to consider adding the 50k in MA emerging bluechip itself. That said hdfc mid-cap is also a very good fund.

If you have a significant amount parked in the fund you wish to exit, you should open a Liquid Fund and first transfer the entire amount to that. You should then start a Systematic Transfer Plan (STP) from the Liquid fund to the new Equity fund that you have picked. This is less risky as compared to moving the whole amount from one Equity fund to the other in one go. An STP is basically an SIP and gives you the same kind of benefits. The STP should run for an average of 12-18 months. Don't bother taking this route if the corpus is small.

From the point of risk, this STP route is not necessary. Why? You already have this amount in some equity fund and are incurring the risk. Just move it one shot to the chosen equity fund and be done with it. This is of course assuming that there are no exit load and LTCG considerations blocking this.

A question to the gurus

My home loan is done, am debt free now. The EMI equivalent surplus amount is now available with me for investment equal to 40K. I have already SIP in some funds based on the goals. The intention of investing the surplus 40K is not specific for a goal but wealth accumulation keeping the risk levels to a minimum. What funds should I invest in? Would Aggressive Hybrid, Conservative Hybrid funds be suitable for my need? Or should I invest in Small Cap fund since the fund values are quite low compared to their peaks?

Pls note this will be a SIP again. Kindly suggest some good min 4 star rated funds with good track record.

Try FRANKLIN INDIA EQUITY FUND - GROWTH / SBI BLUE CHIP FUND GROWTH.

Gurus can comment.

Great to hear that you have 100% equity in your home. That feeling is quite something. As for the fund, it may be helpful to pick the more aggressive of the funds that you already have and add more SIPs to them. Long term wealth accumulation could also be tied to having a bigger retirement corpus and you can tie the new investments to that goal. By the way, the lower performance of small cap funds does not mean much if you plan a long-term investment. You can do that in a red-hot fund as well as a fund with undervalued stocks.

I am late to respond to this thread. It is great to know that you have invested primarily in MF. With the kind of matching that the company gives, you can consider NPS as an additional option. As others pointed out, NPS has its drawbacks - particularly in flexibility, liquidity, and annuity taxation.



But in this case, you can consider that you are diverting 50,000 of your money into NPS, and getting another 50,000 from the company 'free'. This would definitely help to build a larger corpus than what your post-tax 50,000 would build. So go for it, and continue your mutual fund investments too.



Unlike cars, it is indeed possible to have many investments at the same time!

Hi Guys, I was investing in UTI Mid cap fund Direct Growth Option via the SIP method. However its performance has not been satisfactory for the last two years compared to my other equity funds. Value research has also rated this fund at two stars.
I wanted to ask the experts whether to continue in this fund or not.
I was thinking of stopping my SIP and let the amount remain in fund to give it another years time before moving out of it completely. Will also help me to avoid exit loads for this years transactions. What do you guys think??

I am not an expert. However I agree to your views as I would have done the same if I am in your position and I have done some changes to my folio because of a similar situation. Stop the SIP, move on to another fund with a long term track record. Also please consider what are the other funds you own, what are the type of funds you own (Large, Multi, Small, Large & Mid Cap etc) and then decide the fund to invest in.

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