How SIP-ping Into Unworthy Mutual Fund Scheme May Cost Your Financial Wellbeing - Outside View by PersonalFN

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

How SIP-ping Into Unworthy Mutual Fund Scheme May Cost Your Financial Wellbeing
Aug 16, 2019

The latest AMFI data shows that SIP contribution reached its all-time high in the month of July 2019 with net inflows of Rs 8,324 crore.

Total inflows in Equity schemes of mutual fund increased month-on-month (M-o-M) to Rs 8,092 crore. The total number of accounts (folios) as on July 31, 2019 stood at 8.48 crore, while the number of folios under Equity, Hybrid, and Solution Oriented schemes stood at 7.62 crore. This is the 62nd consecutive month witnessing a rise in the number of folios.

The increase, however, was not sudden; SIP inflows have been steadily rising in the past few years. Mutual fund SIPs accounts as on July 31, 2019 stood at 2.78 crore. Mutual funds added 9.54 lakhs SIP accounts on an average each month during the FY2019-20, average SIP size being Rs 3,000 per account.

--- Advertisement ---
To Readers Who Plan on Quitting Work Someday…

Please read this only if you want to quit your regular jobs someday…and be independent of your income.

If that's not you – please ignore the rest of this message.

Because we have a simple goal in mind…to guide readers towards using the Double Income strategy.

A strategy that, over time, has the potential to bring in as much, or even more than one's regular income, every month.

And if you're interested, Rahul Shah is hosting 4 video classes between 17th and 24th September – to teach his readers how to use this strategy.

Sign up here.

Oh, and one more thing – these classes are completely free for Equitymaster readers.

But we have limited seats available – if you're interested please sign up as soon as possible.

Once your seat is blocked – you won't run the risk of missing out, and you can decide whether to attend or not.

Click here to sign up – it is completely free, and there are no forms to fill up.

The July inflow numbers come as a pleasant surprise as the increase was despite a sharp correction in the market during the same month. Stock markets took a succession of hard knocks since the announcement of the Union Budget on July 5, 2019. The hike in surcharge announced in the Budget did not go down well with the FPIs and led to a huge outflow from the markets.

The Budget, however, did announce a number of measures to revive the economy, some of which are as follows:

  • Vision of $5 trillion economy
  • Infrastructure push
  • Funding for Banks and NBFCs
  • Growth push for start-ups

The rise in inflows despite volatility is a positive sign as it points to investors' maturity and trust in the mutual fund industry, specifically through the SIP route. More importantly, it highlights their faith in India's growth story.

Investing during a market downturn can lead to better returns in the long-term. When you invest via SIP, more units are purchased and added to your portfolio when the markets are low, so when the markets bounce back, the rewards are higher.

The Double Income Project: Free Registration

[Read: Why Bet On High Alpha Funds In This Gloomy Market]

This makes SIP one of the best ways to invest in mutual funds. With SIP, you can customise the portfolio as per your needs. Over the long-term, it has better potential to generate higher returns as compared to other investment avenues.

But investors should remember that they cannot allude SIP to be a safe investment plan. Since it is a market-linked product, the value of your investment may decline over time and hence SIP returns may turn negative. It may also expose you to credit risk if the credit rating of a particular company that the fund has invested in is downgraded by rating agencies.

That said, SIP investments can help you mitigate the risk involved in investing in markets. Additionally, you will benefit from its rupee-cost averaging and wealth compounding feature that helps in wealth creation.

Though it is important that you stick to your investments regardless of the market noise, it is equally important that you select worthy schemes to SIP into. If you select worthy schemes you need not worry about the performance of the scheme during the short-term as it will provide meaningful returns in the long-term.

To select the right scheme, you need to carefully evaluate it based on quantitative and qualitative parameters, and shortlist the one that has consistently performed well across market phases. Selecting unworthy schemes may cause you to deviate from your target and this will impact your financial wellbeing.

Furthermore, it is imperative that the portfolio is strategically structured. To avoid unnecessary risk, invest only in schemes that match your risk profile, financial goal, and investment horizon. You can adopt `Core & Satellite' based approach to strategically structure your portfolio and reduce the risk involved.

[Read: Why It Is The Best Time To Build A Strategic Mutual Fund Portfolio To SIP Into]

The term `Core' applies to the more stable, long-term holdings of the portfolio, while the term 'Satellite' applies to the strategic portion that would help push up the overall returns of the portfolio, across market conditions.

--- Advertisement ---
Rs 4 Trillion Opportunity?

In this One Stock Crorepati Video, Richa Agarwal, Research Analyst and Senior Editor, reveals details of a 'crorepati' stock.

In short, it's a little-known Indian company, which is now tapping into a Rs 4 trillion industry.

You see, right now, few people are aware of this 'crorepati' stock's involvement in a massive Rs 4 trillion industry.

But word will soon spread and it might not remain a secret for long…

After that, you may have to pay a much higher price for this very same stock.

That's why we urge you to watch this video right now where Richa Agarwal reveals the details of this stock.

This video could be pulled out anytime…So don't delay it for any reason and make sure you watch it right now.

Click here to know the details of the Crorepati stock…

The `Core' part can consist of large-cap fund, multi-cap fund, and value style fund and should form 60% of your portfolio holdings. Whereas, the 'Satellite' part of the portfolio (40% of holdings) should include a mid-cap fund, large & mid-cap fund, and an aggressive hybrid fund.

This strategic portfolio lets you focus on the stable schemes with a long-term view and at the same time capitalise on short-term opportunities. Its unique combination helps you generate superior returns without taking excessive risks.

Once you have strategically designed your portfolio, stay invested until your goal is achieved. However, do not forget to review the performance of your portfolio at least once a year. The review will help you determine if you are holding any non-performing funds which need to be replaced.

Editor's note: If you are looking for high rewards with moderate risk, consider PersonalFN's Premium Report, "The Strategic Funds Portfolio For 2025(2019 Edition)".

With this, you gain access to a ready-made portfolio of top recommended equity mutual funds for 2025 based on the Core & Satellite approach to investing you've read about in this article.

If you haven't subscribed yet, do it now!

Author: Divya Grover

This article first appeared on PersonalFN here.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.


The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

Equitymaster requests your view! Post a comment on "How SIP-ping Into Unworthy Mutual Fund Scheme May Cost Your Financial Wellbeing". Click here!


More Views on News

The Silver Lining in Disruptive Businesses podcast (Views On News)

Sep 18, 2019

The positive side of technological disruptions and rebound opportunities in blue-chip stocks.

Do You Hold These Worst-Performing Equity Mutual Fund Schemes In Your Portfolio? (Outside View)

Sep 18, 2019

PersonalFN explains what you should do if you hold non-performing funds in your portfolio.

Fed Up of the Bad Real Estate Market? Here's a Stock You Can Buy Today (Profit Hunter)

Sep 18, 2019

This tough period for most companies in the realty sector has been a blessing in disguise for one branded real estate player.

How Rahul Shah Helped Me Recommend Hindalco Which Doubled in Six Months (The 5 Minute Wrapup)

Sep 18, 2019

Rahul Shah's contrarian approach was the key reason behind my successful Hindalco call.

Did the Saudis Bomb Their Own Oilfields? podcast (Views On News)

Sep 18, 2019

Drone attacks on Saudi oilfields and what it means for oil prices.

More Views on News

Most Popular

Buying these Eight Stocks is Like Owning Your Own Business (Profit Hunter)

Sep 5, 2019

Everyone dreams of owning a business. Here is your chance.

7 Stocks to Buy in the Market Today (The 5 Minute Wrapup)

Sep 5, 2019

The stock market had a four-year bull run starting September 2013. Are we seeing a similar pattern now?

Buy these 7 Stocks if You Believe in India (The 5 Minute Wrapup)

Sep 12, 2019

News headlines predict gloom and doom for India these days. You should ignore them.

A Recession Proof Stock You Can Bet On (Profit Hunter)

Sep 10, 2019

Usually, the typical horizon period for my smallcap recommendations is 3 to 5 years. But if you ask me, this could be one business that you could own and pass on to future generations.

This Company Will Do Well Despite the Slowdown (The 5 Minute Wrapup)

Sep 11, 2019

How financial inclusion provides a big runway for this stock recommendation.


Get the Indian Stock Market's
Most Profitable Ideas

How To Beat Sensex Guide 2019
Get our special report, How to Beat Sensex Nearly 3X Now!
We will never sell or rent your email id.
Please read our Terms


Sep 18, 2019 (Close)