Keep your SIPs going

It is when the markets decline that you reap the real benefit of SIP by being able to buy more units of a fund Recent news reports suggest that one in three SIP-related request this year has been for closure of SIP accounts. Earlier, a report from UBS had also warned that SIP-based inflows into the equity markets could stall if historic returns turn negative. With the markets turning volatile, there is very much a risk of that beginning to happen now. Whatever others may do, you should not stop your SIPs as this could do a lot of damage to your long-term investment plans. Novice investors, who entered the equity markets in the past couple of years, when there was a bull run in progress, are most likely to stop their SIPs when the markets decline. These are usually investors who have not fully understood the risk in equities. They have not internalised the reality that equity markets tend to be highly volatile in the short term. But if they hang on to their investments, they will be rewarded with high returns in the long term. Many investors also tend to stop their SIP investments because there is a mismatch between the ideal investment horizon for equities, and the time horizon with which they entered this asset class. The ideal time horizon should be at least 7-10 years. If you came into the markets expecting to make money within a year or two, you are likely to be perturbed by the interim volatility in the markets. Recalibrating your time horizon will enable you to deal with markets turbulence better....
Avoid NFOs, stick to tried and tested funds

Avoid NFOs, stick to tried and tested funds

If you go to the Association of Mutual Funds in India (Amfi) website, you will be able to see the list of new fund offers (NFO) that are currently available (https://goo.gl/rMMLio). Your friendly neighbourhood mutual fund agent may also be pestering you to buy a hot new fund which, according to him, has great prospects. Before investing in an NFO, you should do a little research. An NFO is basically a new fund that a fund house has just launched. Such launches are typically accompanied by an advertising and marketing blitz. Often, mutual fund agents are offered high upfront commissions on these new products, which is why they urge you to buy them. The biggest drawback of buying a new fund is that it does not have a track record. In an existing fund that has been around for a long time, you can check how it has performed vis-a-vis its benchmark and also compared to its category peers. If the performance is sound, and the fund manager who was responsible for earning these returns is still there at the helm, you can invest in such a fund with a certain degree of confidence. Since an NFO does not have a track record, investing in it is akin to taking a blind bet. In bullish market conditions, certain sectors tend to outperform others. In such an environment, fund houses launch NFOs for sectoral and thematic funds. Investing in such NFOs can be even more dangerous than investing in the NFO of a diversified equity fund. When the hot streak of that sector ends, such sectoral and thematic funds take...