SIP Investment – Success or failure – Depends on you
Systematic investment in Mutual funds provides good returns in the long term. However some investors see failure in SIP investment and they crib saying SIP investment in mutual funds is not their cup of tea. What are those specific things that need to be kept in mind to gain more in Systematic Investment Plan investment in mutual funds ? In this article, I would provide some insights about how people fail in SIP investment and how these things to be taken care to gain more in getting higher returns.
What is Systematic Investment Plan in Mutual funds?
For the benefit of new readers in this blog, I would provide a some basics of SIP in mutual funds. Others can skip this section.
Systematic Investment Plan (SIP) refers to investment of smaller amounts month on month in mutual funds where they can yield higher returns in longer run. You can invest in a variety of SIP mutual fund schemes which consist of diversified mutual funds, large cap mutual funds and high risk mutual funds like Midcap/small-cap mutual funds or sector based mutual funds. There are hybrid mutual funds & debt mutual funds which are low risk. One can invest in all these schemes as low as Rs 500 per month. Means an investment in mutual funds through SIP can be started by any investor whether he is high risk investments or low risk investor.
Also read: Top 5 midcap/small cap mutual funds to invest for 2014
Why people fail in SIP investment in mutual funds?
1) Investing in large sum through SIP for short term: Mutual fund investments work well when you invest systematically every month over a long term. If you invest large sum through SIP for say 6 months, there are chances that markets might be at peak level and may get corrected in near term. Hence there are greater chances that your investment would get screwed. Hence do not consider taking SIP investment for short term of say 6 months. Always invest for at least 5 years through SIP mode and save your investment more than 8 to 10 years to get higher yields
2) Don’t invest in mutual funds without knowing its objectives: Last week there was a reader who commented on our blog saying that he invested the majority of funds in the sector based funds and mid cap/large cap funds thinking that she is investing in good performing funds. Though the funds are good, they are high risk, high return funds. She is low risk appetite and by mistake she was investing in such funds. First you need to examine the objectives of the mutual fund scheme before investing in any such schemes.
3) Success key is to continue SIP investing: There was a reader few days back who was investing in best performing funds for some time. Yet for some reason he stopped investment through SIP for the past 1 year and he was investing in Bank Recurring deposit. Due to market reaching peak level now, if he would have continued to invest in SIP the last 1 year, he would have gained more than 25% of his entire portfolio. Always continue to invest in SIP investment on a long term basis so that you can encash such market peaks.
4) Don’t expect quick returns: There was comment from Anand who is one of the regular readers saying that HDFC Top-200 is not performing well in last 2 years. This was one of the best performing mutual fund in the last 10 years where it gained more than 20% annualized returns. Don’t expect quick returns, patience pays. Invest in top performing mutual funds through SIP investing and for the long term.
5) Do your analysis and don’t follow your friends: Many of us blindly follow what our friends are doing. Have you done a quick analysis or searched a website or blog about the best SIP investments in mutual funds? One of the reader at the age of 45 is working in MNC company and has 2 children. His comment was that he is following his colleague/friend and investing in ICICI Exports and Services Mutual fund. This mutual fund invests in IT and Pharma sector and other sectors which is just like sector based fund which is high risk. His friend is at 25 age and willing to take risks. However this gentleman is not willing to take any risk and he wants to go with low risk. How you can follow your friend where there is a difference in risk appetite? Don’t blindly follow your friends or colleagues, do your analysis and check whether such fund suits you before investing.
6) SIP strategy – Invest more when the market is down and invest less when the market is up: This is a good mantra. When markets are going down, increase your SIP. When markets are going up without any reason, you should reduce your fresh investments. This way you would be able to balance your investment.
Also read: Top MIP Mutual funds to invest for 2014
7) SIP investment in not for short term: One of the reader commented saying that he wants to invest in SIP in mutual funds for 1 yr. While you can invest in liquid funds or ultra short term mutual funds, these should be used more for lump sum investment parking for short periods. It may not work well if you want to invest in SIP for 1 year. Mutual funds through SIP is not suited for short term game.
Conclusion: I am not saying the above is a comprehensive checklist to grow your money through SIP investment, but these could be considered as a basis while investing in mutual funds through SIP.
If you enjoyed this article, share it with your friends and colleagues on Facebook and Twitter.
Suresh
SIP Investment – Success or failure – Depends on you
- Kosamattam Finance NCD – Nov-2024 Issue – Details and Review - November 24, 2024
- Best Large Cap Mutual Funds to Invest in 2025 - November 23, 2024
- How to Balance Risk and Reward in Your Investment Portfolio - November 19, 2024
Hi,
I just started to learn about MF’s and bit confused how exactly works and there are ‘n’ no of plans r ter. a simple question my age is 28, if start invest 5000K monthly for next 25 Yrs on ‘XXXX’ plan, is there any possibility receive money lesser than invested after after 25yrs?.
Regards,
Saravanan V
Sir as no one can guarantee it. But I can only assure you that you can get around 1.5 crore
Thanks for your good work,
I am planing to do SIP each Rs 3000 for the below funds, what is your view please?
Icici pru value discovery
Franklin india high growth fund
Sundaram Mid cap fund
DSP BR Micro cap fund
take care
g.rajesh
Rajesh, pls review this article for top funds. https://myinvestmentideas.com/2014/12/top-10-best-sip-mutual-funds-to-invest-in-2015/
Hi,
i am keep reading your blog and its very useful for new investor like me…. i want to invest around 4-5 K per month…
here my question is,
1) this is the correct time or should i wait for more time as market is getting down ??
2) should i go with four different MF with 1k/per month or 2 MF 2k/mer month ??
thanks in advance.
rgds,
gourav
Forget about timing, invest every month through SIP
I am 25 year old ans an amateur in investment. Please suggest me SIP plans so that I can have a good sum of money when I will be 30.
You can refer this article. https://myinvestmentideas.com/2014/12/top-10-best-sip-mutual-funds-to-invest-in-2015/
Hi Suresh,
My father invested about 15 years on one of the ULIPS plan as per his friend’s says, however he got even the lesser amount than he invested, Just wanted to know whether SIP investment are like ULIPS, or at more risk or lower risk, because I am willing to invest in SIP plans.
Regards
Deepak Bisht
Deepak, MF’s too carry risks. However if you can invest in top funds and do SIP, you can always get 10% to 15% annualised returns. These are not comparable with ULIP’s where insurance agents cheated investors and sold such policies.
Hi Suresh,
Thank you so much, can you tell me where I can buy SIP as I am totally newbie in mutual funds, I am willing to invest Rs 1000-2000. Also It will be appreciable if you can tell a bit about high risk and lower risk? And how badly it can affect on your investment.
Also suggest me some good SIP to invest.
Regards
Deepak Bisht
Open MF account with ICICIdirect.com or fundsindia.com. Invest every month through SIP. But invest for long term. You can expect good returns.
Hi Suresh,
I want to invest 5k pm.I am new in sip.please suggest me good funds with moderate risk level.I want to invest for long term 5-10 years.
Thanks
Invest in these funds. 1) Large cap – HDFC Top-200 / ICICI Pru focussed blue chip fund 2) Balanced – You can check HDFC Prudence / ICICI Balanced fund.
Hi Suresh,
I want invest 5000 pm through SIP for 5 years and after 5 years i wants see my portfolio to be around 500000.kindly suggest me which fund do i need to choose to achieve my goal. Second question, is it a right time to invest in SIP as market is in high.
Hi Suresh KP, I have invested 2Lakhs in Reliance Monthly Income Fund and STP to Reliance Growth Fund as SIP every month. Is it right decision to choose Reliance Monthly Income plan as liquid fund for my SIP plan? Is there any better way, that, I can adopt for my next lumpsum investment?
Thanks, Krishna P
Krishna, all liquid funds provide some or other returns, don’t worry. Since you are parking for very short term don’t worry too much on that. However reliance growth fund is ok, but there are better funds. You should fix this on prirority.
Hi Suresh , I am 35 years old working for a MNC ,have started reading through your blog from last one week and has been a real help in terms of easy understanding of investment options ! Great presentation ! I want to invest in Mutual Funds to a tune of 15 – 20 k per month through SIP for long term , am considering to divide this SIP between the 10 top MF 's listed by you for this year , am I right in doing that and secondly can I do it all at one place by opening an ICICI direct demat account . At the moment my investments are in RD , FD and few ULIPS ( no more investing in this over rated marketing product ) Also , being a complete naive in Mutual Funds , can you please elaborate on differnt MF's like Large cap , medium cap , liquid , debt etc all sorts of fund types . Am asking for many queries and that too some may sound bit silly , however , it can be of great help to everyone like me in understanding their investment options better . Regards Kunal
Pls see this article Kunal, you would get good idea on this. https://myinvestmentideas.com/2013/06/what-are-mutual-funds-and-how-do-they-work/
If the SIP fund selected by a person is not doing well , say for 1 year or two , what should he do? continue investing or shift to another fund?
Better to shift the fund Denny
Hi sir guide me for which share is better to invest guide 1)power sector- sjvn limited, jp power ventures2)Jmfinancial 3)infrastructure- Gmr,lanco,gvk,jaypee,india bulls.
Which is better market in future guide me…….
Hi Balaji, I am not providing stock advices as of now.
R/Sir,
I very new to mutual fund investments. I have started investing Rs. 9500/- through SIP as per detail listed below:
1. HDFC Balanced Fund – Growth – Rs. 2000/-
2. HDFC Equity Fund – Growth – Rs. 3000/-
3. HDFC Mid Cap Opportunities Fund – Growth – Rs. 3500/-
4. HDFC Top 200 Fund Growth – Rs. 1000/-
I was panning SIP for atleast 10 years. Please guide me weather i am on right track. Or i have to switch over to any other fund.
Please tell
Thanks
Hi Anil, Looks you are fan of HDFC mutual funds, you have selected all the funds from this 🙂 You can remove HDFC equity fund from this and add any other funds like ICICI focussed blue chip fund or HDFC Top-200 funds
Hi sir buying shares in which at present market is gud infrastrucure , banking or industries and when we buy how much no 100shares I should buy for gud returns, which is gud guide me……..
Don’t do direct invest in stocks unless you know how they run. I hope you are familiar with stocks. You can invest systematically every month in such stocks so that all market fluctuations are taken care.
I want open a demat account shall i go for indian bank, Hdfc bank &icici bank kindly guide which is less transaction charges and user friendly……
Balaji, The ones you have indicated are banks and their subsidiaries are offering demat account. All have their own pros and cons. None of them offer low charges. Check our article on how to choose demat broker account.
HELLO sir,
iam new for mfs. i want start invest sip in sbi mf 1000 for mnth….its write or worng
plese help me
Naraisimha, please inform which SBI MF you want to invest ? There are several schemes
I have a doubt that we are buying shares in demat amount and when we selling the share money will be in demat account or saving account. If u want to transfer the money demat account to saving account how guide me.
Hi Balaji, Demat account dematerialized form of shares. When you buy shares, your bank account would get debited and shares would be added to your demat account. When you sell shares, your demat account would be reducd to that extent and money is credited to your SB account which is linked to your demat account.
I want to open ah demat amount which sector I to go indian bank , icici bank, hdfc bank. Which is gud & less transaction charges guide me the best sector in always……
There are several brokerage houses where you can open demat/trading account. Check the transaction charges / annual charges and take a call.
Hi sir during our early conversation u advised me for go to large cap mutual funds and balanced funds. Kindly guide some of the large cap and balanced funds which gives gud returns…….
Hi Balaji, You can invest in large cap funds like ICICI Pru focussed blue chip fund, HDFC top 200, Birla SL Front line etc. Balanced funds, look for ICICI balanced fund and HDFC balanced fund
I am begineer in mutual funds my age 25 I want to invest rs2000to 3000 , guide me for long run and short run , which funds and all gud I planning for sbi pharma , hdfc infrastructure, hdfc top200etc
Hi i am balaji my age 25 at present I am investing my savings in fd and Vrd in indian bank , which bank gives highest fd & I should continue same for gud returns or I should change my savings to shares & mutual funds how to allocate kindly give ur guidance……
Investment in FD and VRD is good. However start investing in balanced funds as these are less risk and you would get exposure to mutual fund investments.
Balaji, Good, but you are selecting in sector funds only except for HDFC top200 .Select some from large cap funds too.
Hi Suresh,
I started investing in MF's through Fundsindia from past 2 months. But slowly i realised that investing through direct plans of MF's will be more beneficial. All investments done are through SIP's.How to switch now to direct plans with min charges. Should i stop the existing SIP's in FundsIndia? Or should i just redeem as it has been only 2 months now? Please advice the best option to switch
Sandy, There is no switch option. You can cancel SIP and continue your holdings with fundsindia.com or you can redeem and come out. Paralelly you can apply for regular plans and do the SIP. Regular plans provide higher returns between 0.75% to 1% per annum.
Hi Suresh, What is difference between regular plan and direct plan in MF.
I can see in Sandy comment ,direct plan is more beneficial and at same time in your comment ,mentioned that regular plans provide higher return.I’m newbie for this MF,So please try to answer this.
Venkatesh, Pls see this article which has complete details on regular vs direct plan. https://myinvestmentideas.com/2013/05/mutual-fund-direct-plans-vs-regular-plans-which-is-the-better-option/
Hi Suresh,
I started SIP's like below.
ICICI pru Focussed Blue chip – Large Cap – 1500
Birla SL Short term Fund – Debt Short term – 1500
ICICI Balanced Adv Fund – Balanced – 1500
ICICI pru Dynamic Plan – Diversified – 1000
SBI Emerging Business Fund – Mid cap – 1000
Other than these i am investing 1000 pm in PPF and a RD for 5000 pm for 2 yrs.
My Risk profile is moderate. Do you think the portfolio above suits profile or am i too much into equity. My plan is for long term only > 5yrs. Should i remove the mid cap fund above and add any large cap or balanced? Or should i add a Debt long term? Also what is the reasonable time to assess these funds regularly?
Sorry too many questions but you can take your time to assess this 🙂
Thanks.
Hi Sandy, You can put more questions, no problem at all. Except for SBI Emerging, all others are moderate risk to low investment options. You can stay invested. You should haved 1 or 2 mid-cap funds, hence there is no harm. However you have chosen one short term fund. Why do you need to invest in such short term funds? Choose a large cap fund and invest.
Hi Suresh,
Thanks for reply. The reason i chose Birla SL Short term debt fund is to decrease the risk in my portfolio, as all the remaining are equity oriented. Is that a right choice for some stable returns in next 3-5 years?
Thanks.
Yes it could be one strategy. However you can do that by investing in balanced funds which more or less would reduce the downside.
Hi Suresh ,
i am 22 yrs old
and i wish to invest in SIP 5k per month
what do you suggest ?
and actually whats the procedure to start a SIP ?
Can you please guide me through the process.
Hi Sai, Good to know that you want to save at such young age. Please open mutual fund account with any brokers like ICICIdirect.com or fundsindia.com. Once you open it, start SIP (monthly investment) in a few mutual funds. To start, you should invest in debt funds or balanced funds. You can choose HDFC Balanced fund and ICICI Balanced fund to start. Once you are familiar, you can invest in variety of mutual funds.
Any specific reason for suggesting icicidirect or fundsindia for him? He may directly approach any of the AMC to start a sip. He can choose the one or two best MF schemes and download the forms and submit it to AMC or POS centers. He should complete KYC if he hasn't done yet.
Kannan, I had already written an article about pros and cons about investing in direct plans of mutual funds. If one has time to do KYC and track them through individual mutual fund houses, it is good way to invest. But if an investor is new or he just entered into the world of mutual funds, asking him to buy from direct plans would scare him and they might not show any interest at all. I invest in ICICI Direct.com where they charge Rs 33 for every Rs 5,000 SIP, I am ready to pay to get such premiums services to have demat accoount, MF account and all other services at one place as I do not have time to track. MF brokers like fundsindia do not charge any such transaction charges too. I hope you understand why I recommend
I can understand that. Thanks for clarification. What you said is correct. Tracking our investments is complicated and time consuming. If they are not going to do much transactions and can manage the transactions on their own then can go with direct option.
Thanks Kannan. You and me were able to understand this quickly as we are matured in these mutual fund transactions. New investors would take time.
Hi Suresh.Thansk for updating regarding market situation and plans.
I want to invest in SIP. Kindly suggest me some good SIP plans in ICICI . My Risk appetite is mdeium. I have heard about ICICI Wealth Bulider II. The agent told to invest me in this plan with maximiser V fund. Kindly suggest me where i can invest so that i will get good returns.I will appreciate if you tell me some plans.
Mohit, What you are hearing are not mutual funds. They are ULIP’s. I personally do not prefer to invest in ULIP’s. Instead I would consider term plan and invest my money in other investment options like MF’s or tax free bonds or bank FD’s.
Hi,
Thanks for your guidance.
1. How many years do you recommend for any Sip investment? Is it differs depending upon category (like sector funds, deversified, largecap, etc.)
2. Let’s say the fund we are investing is not performing well, Say we keep on losing investing money on that. How long we can wait before we stop the sip on that fund.
Kannan, diversified funds or large cap funds invests across sectors and across various market capitalizatoin stocks, hence they tend to perform better in long run. However for sector funds, they invest in a specific sector. e.g. Technology funds. Due to rupee to dollar rate increase and US economy booming all IT stocks are doing well. This is only short term in nature. In next 2-3 years it may be downturn. Hence you should invest in sector funds for short term of 1 to 3 years only. Regd second query when to exit if a fund is not performing, you should invest in Crisil Rank-1/Rank-2/Rank-3 and 3 to 5 star rating funds. This way the downward would be less. There may be situation that 5 star fund would have downgraded to 3-Star, but it is still ok, but if this is downgraded to 2-star or 1 star there is an issue. We should keep checking the health of the funds every 6 months so that we know we are in righ track.
Hi Suresh,
My risk profile is moderate. So i wanted to invest 40% in equity and 60% in debt or safe instruments. On equity side i chose 2 funds 1) Icici focussed blue chip – large cap and 2) Icici Balanced Adv fund – Balanced. But i am confused how to allocate the other 60% on debt side or any other options. Due to high interest rates i think debt markets are not giving good returns. Can you advise me on this?
I agree Sandy. Instead of debt funds, look to invest more in balanced funds and some amount in regular FD’s.
Hi Suresh
Nice article. I have one question regarding the MF portfolio. My goal is to create wealth in the long term (15 to 25 yrs) for my own retirement and childrens education and marriage. Am a regular investor in MF via SIP since 2005 in the following funds, some are 3 star(which were once 5 star), 4 star and 5 star funds like DSPBR top 100(large cap), FT India Bluechip(large cap), IDFC Premier eq(small cap), Quantum LTE(multi cap).
I do have L&T equity fund(multicap)(Fidelity equity fund) since its inception from 2005 and have accumulated more units in this fund. This fund was once the top performer in the category may be a couple of years back. If I disturb this fund and switch to other better performing fund like ICICI Pru dynamic(multi cap)I will lose the power of compounding generated in this fund since from inception. How do you suggest about L&T equity fund. I think other funds are good recommended funds.
Since my horizon is for long term, I think I should not bother on the volatility existing in the markets now. Please comment
Satish, L&T equity fund is good fund. Stay invested. Yes don’t bother about short term volatilities. My suggestion would be to diversify into multiple schemes instead of depending on 1-2 schemes.
Hi suresh,
Thanks for the articles and i am very much inspired by your articles.
I can invest around 15000 INR every month, please suggest me the best SIPs for long term and number of SIPs to be maintained. Till date i am not invested in any mutual funds.
Waiting for your reply.
Hi Govind, Invest in largecap or diversified funds like ICICI Pru focussed blue chip fund,BNPP Equity fund, UTI Opps fund and Quantum long term equity fund. You can pick any of these funds.
Hi,
It's Rakesh.I am 30Yrs and Married
I have SIP for HDFC TaxSaver – Growth 2000/- monthly and ICICI Pru Tax Plan (G) 3000/- monthly
both having almost from 2 Year..
what do you suggest on both and any other long term SIP where can go for 1000/- monthly ??
Hi Rakesh, ICICI Pru tax is good. Stay invested. HDFC Tax saver is under performer in last 2-3 years. You can look to exit or you can hold for some more time before you exit. For long term invest in Franklin India blue chip fund
Hi Suresh Sir,
Very useful article. Happy new year to you & your family. Keep posting.
Well researched article. I can personally voch that HDFC TOP 200 is VFM-value for money.
Thanks Rajiv for your kind words.
Hi Suresh,
Thanks for the article. Its very helpful. I just started my SIP investments. I started with Icici Pru focussed blue chip-G in the large cap category. Since my risk profile is moderate, i want to go for a balanced fund next. Icici Pru Balanced Advantage Fund – G is ranked 1 by Crisil. But when i compare portfolios and holdings of the above two funds blue chip and balanced, they are almost same except that the blue chip invests 96% in equity and balanced invests 65% in equity which is expected.
My question is, the two funds above are ranked 1 in their categories. But their portfolio looks similar. So is it beneficial to invest in both of these? or should i go for other balanced funds like HDFC Balanced fund etc.
Thanks.
Sandy, Funds invests in blue chip stocks. That does not mean that they would invest in same stocks. You can go ahead and invest in these two funds. Alternatively you can diversify and invest in 3 funds too.