Compounding in SIPs

POSTED BY Biswajit Das ON February 18, 2013 1:14 am COMMENTS (3)

We all know that SIPs can do wonders in a longer run due to compounding. Again we are talking about reviewing the performance of existing MFs atleast once in a year and exit if required. Now I have one doubt

Suppose, If we stop one SIP in MF ‘A’ after 2 years and started a new one ‘B’. Now how can we get the benifit of compounding from the amount already invested in ‘A’ after stopping further investment in it. Do we redeem ‘A’ after exit load tenure is over and invest the amount in ‘B’ or just leave the amount in ‘A’ to grow? If we leave the amount in ‘A’, then how compounding will happen?

3 replies on this article “Compounding in SIPs”

  1. Sumit says:

    It’s better not to redeem everything from A, and invest fully to B, if your fund A is not performing drastically bad (or you are not short of money). You can move from fund A to B, or B to C anytime depending on fund’s performance, but let that money roll in market rather than taking it out, then only you will get advantage of compounding. That’s what I feel.

  2. Karthik says:

    Compounding happens, even if you stop contributing to the fund regularly, but you keep the existing old investment in the fund.

    Also, read the below topic, which is somewhat similar
    http://localhost/jagoforum2/long-term-portfolio-is-it-okay-to-replace-funds-between/6717/

  3. dear Biswajit, compounding ‘ll happen in old fund also. Yes the rate of compounding ‘ll be lower due to the over al decline in performance of this fund. One may switch all together after zero exit load.

    Thanks

    Ashal

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