questions regarding SIP

POSTED BY prakash arumugam ON January 17, 2012 10:18 pm COMMENTS (12)

hi manish,
this is prakash, i am 22years old, i would like to invest in SIP or any other mutual fund which involves less risk, which is for 3-5 years, i dono much about finance, it would be great if u could help me with it, like which company should i opt for, my monthly investment will be 1000-2000rs…..or you can suggest me how to do my financial planning…
thanks in advance

12 replies on this article “questions regarding SIP”

  1. Narayan says:

    Systematic Investment Plan (SIP) is an option that allows you to invest regularly in a mutual fund scheme. As a new investor and considering your risk profile; go with a balanced fund. Opt for HDFC Balanced and HDFC Prudence. The inherent asset balancing with these funds makes them ideal for new investors. Start investing through SIPs and observe how these investments work, this will give you an idea on how SIPs work and you will gain confidence in investing through this route.
    Once you have gained experience with SIP investing you can consider diversifying your portfolio and look for funds from other categories that align with your risk profile and asset-allocation plan.
    Regards
    Narayan

    1. prakash arumugam says:

      thanks narayan….

  2. Hi prakash ,

    Its nice to hear that at this young age you got to know the value of saving / investing.
    You have not mentioned your monthly income ., By assuming that you are earning 20k u can invest some more amount in mutual funds ., SIP as ashal said is just a way to invest in mutual funds 🙂 Its like you will be buying some units (shares) every month on a specific date specifies by you .,
    Visit : http://www.fundsindia.com for more info
    If you can invest only 1k – 2k its not a problem., you can put your money in either HDFC top 200 or Hdfc prudence or balanced fund.,
    For more info visit : http://www.valuereasearchonline.com or http://www.moneycontrol.com
    Happy Investing!!!

    Regards,
    Sri

    1. prakash arumugam says:

      thanks to all who answered.
      hi srivatsan,
      i could save around 6000rs every month, i have just opened a ppf account, thought of contributing 3k every month, rest 3k i am finding a better way to invest, i thought mututal funds would do the trick, but the problem is i am confused….here i put forth few questions if it is very silly forgive my ignorance,
      1.if i am investing 2k every month in HDFC prudence fund, is der any lock period, if not i can withdraw anytime i want or is there any restriction.
      2. can i take a break, like not investing for one or two months or i have to invest every month atleast some minimum amount
      2.for example if i am investing for 3 years, i would have ended up in investing 72k, the return i would get depends on the market value rite? is there any possibility that the market value is such that i would get less than 72k.

      thanks in advance

      1. Ramesh says:

        1. You can withdraw on any working day (and will get your money back in 3-4 days). However, there is a penalty of premature withdrawal of usually 1%, if you withdraw with a stipulated time, usually 1 year (depends on the actual fund). After 1 year, you do not get that penalty.
        2. You can take a break, which usually means you have stopped the SIP. You can restart it (but the period of 1 years gets reset usually). Some providers / distributors / funds let you have 1 or 2 missed SIPs.
        3. Yes, it is possible for your net value to be less than the principal (which is why equity-investing is called risky). A longer term is certainly advisable.

        1. prakash arumugam says:

          thanks ramesh…

      2. Dear Prakash, with due respect to KBC & Mr. Amitabh Bachchan, ” Koi bhi Sawaal Chhota nahi hota.”

        So you are not asking any silly questions. Your questions do have merit.

        You are doing a sensible thing by splitting your 6K amount in to 2 portion of 3K each. Please invest 3K mly basis in PPF & another 3K, invest in HDFC Prudence.

        By the way, the PPF is more profitable if you can manage to invest full 36K (3K*12) amount in one lump sum between 2nd april to 5th april every year because you ‘ll get full year’s interest.

        Thanks

        Ashal

        1. prakash arumugam says:

          hello ashal,
          actually i thot that investing 3k every month in my PPF account, is similar to investing 36k at the end of financial year…..how does it make a difference, because at the end of every financial year only they will be calculating the interest rite….by that time i would have 36k in my account… can u explain me ashal… thanks for ur help ashal….

          1. Dear Prakash, Yes your investment is 36K in each case but the earing of interest is different in each case. For 3K mly method, you earn interest for the months the amount was in PPF so for each remaning month, the next 3K investment ‘ll fetch less & less interest. where as 36K investment ‘ll earn full year’s interest for that year.

            Hope it clear your doubts.

            Thanks

            Ashal

          2. prakash arumugam says:

            yep, got it ashal, thanks a lot……..

  3. Dear Prakash, Please understand SIP stands for Systematic Investment Plan. It’s a medium to invest in Mutual funds regularly with a discipline & not the mutual fund itself.

    Keeping your profile in mind, my take ‘ll be to invest your money on mly basis in HDFC Prudence fund growth option.

    Thanks

    Ashal

    1. prakash arumugam says:

      thanks a lot ashal

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