5 Things To Know Before Starting Mutual Fund SIP

Mutual fund SIP is generally recommended to retail investors who have long-term goals with regular contributions. Systematic investment plans (SIPs) are fixed amounts invested at regular intervals — monthly, quarterly or annually — in mutual fund schemes into equities only (equity mutual fund), debt only (debt mutual fund) or a mix of both (hybrid mutual fund).

Choose A Good MF Scheme

Before investing in the SIP, investors need to choose a good mutual fund scheme that suits their financial goals as per their risk-taking capacity. It is an extremely important step as there are various MF schemes available in the market based on their holdings and risks. Some schemes have ‘very high risk’, ‘high risk’, ‘moderate risk’, etc.

If your goal is saving taxes, you must choose an ELSS (equity-linked savings scheme). It has a lock-in period of 3 years.

Do Research About The Fund Manager

After shortlisting the mutual fund schemes based on your financial goals, you need to check their fund managers and their past records. This information is available publicly. It is very important as your whole money will be up to him to invest. The fund manager keep shuffling the invested money into various stocks or financial instruments as per the market needs.

Check MF Holding Companies

It is necessary to check the mutual fund scheme’s holdings. It shows how much of your money will be invested where. If your MF scheme is an equity mutual fund, your whole amount will be invested in equities into various companies. MF holdings will show the names of the companies along with the percentage of your SIP amount in each of them.

Check Mutual Funds Fees, Expenses

Mutual funds come with expenses like management fees, administrative costs, and load fees. These fees can eat into your returns over time. Look for funds with lower expense ratios, as they tend to have a better chance of outperforming high-cost funds in the long run.

Do Not Panic Sell

You need to accept before MF investment that markets keep fluctuating and based on that, your investment or MF’s net asset value (NAV) will also keep fluctuating. It is important to stay calm during market volatility and avoid making impulsive decisions. If you panic sell, you may end up selling your investments at a loss.

Last week, data from the Association of Mutual Funds in India (Amfi) showed that the monthly flow in the mutual fund industry through SIP reached an all-time high of Rs 15,245 crore in July. The record high SIP numbers came despite the equity mutual funds registering a 12 per cent month-on-month decline in inflow to Rs 7,626 crore in July.

“The surge in retail investors’ interest in mutual funds has translated into impressive inflow across scheme categories. The star performer this month has been SIP, with an impressive over 33 lakh new SIP accounts registered and a record Rs 15,215 crore of monthly contribution,” Amfi CEO N S Venkatesh said.

The monthly SIP contribution in July was way higher than Rs 14,734 crore inflow seen in June and Rs 14,749 crore in May, which was the previous high.