3 things you didn’t know about Mutual Fund SIP investments
As AMFI’s “Mutual Funds Sahi Hai” rings ubiquitously every time you switch on your TV, interest in Mutual Fund SIP investments continues to grow manifold. Per latest estimates, the industry’s Mutual Fund SIP book has recently gone past the 7,000 Crore mark – that’s an automatic inflow of Rs. 84,000 crores over the next twelve months! If you, like many others, have recently decided to go down the Mutual Fund SIP route, here are three things you need to know.
Low Returns are Not (Necessarily) a Bad Thing
Admittedly, Mutual Fund SIP returns over the past year or so half been quite dismal. However, before you get fed up and throw in the towel – know this: low returns, especially during the first few years of your SIP’s, are not necessarily a bad thing. How so? Low returns essentially imply that markets haven’t performed all that well since you started, and so you’ve been making bite sized investments into relatively depressed markets. When the tide turns, you’ll have accumulated a lot more units in the process than you’d have, if markets had linearly moved up! This could actually augment your long-term returns.
The More Volatile, The Better (in The Long Run)
Do you balk at the volatility associated with small cap and mid cap oriented mutual fund investments? Think again, especially when it comes to Mutual Fund SIP’s! The zigs and zags associated with volatile funds actually enhance the rupee-cost averaging aspect of your Mutual Fund SIP’s, which is why you’ll notice that short term woes notwithstanding, it is the volatile funds that invariably deliver better SIP returns over the long run! The caveat? You’ll need to buckle up for a rough ride, but the end will be worth it!
You can Attach a Life Insurance Cover to Your SIP – Free of Cost!
Three Asset Management Companies with Life Insurers as sister concerns now offer a free Life Insurance cover with their SIP’s. Others are likely to follow suit. They do so by including Mutual Fund SIP investors into a group term plan and bearing the cost themselves, without this impinging upon the expense ratios of their funds. All you need to ensure is that you continue running your SIP for at least 3 years for the cover to be in force. By the third year of your SIP, your death benefit could be as high as 100X the monthly SIP instalment! For a SIP investment of Rs. 50,000 per month, that’s a neat sum of Rs. 50 Lakhs.