ELSS or SIP: Which route is best for your investments?
Equity diversified NAVs ended higher Wednesday with advance:decline ratio of 221:23 as the Equity benchmarks witnessed consolidation throughout the session on Wednesday, ahead of F&O expiry tomorrow for the month of June. First half of trade was negative with modest losses on weak global cues and the Nifty struggled at the 5300 level. However, the Nifty managed to hold 5300 in the last couple of hours.
The 30-share BSE Sensex closed yesterday at 17,755.94, up 6.25 points while the 50-share NSE Nifty rose 6.60 points to 5323.15.
In an interview with CNBC-TV18, Kartik Varma, Co-Founder, iTrust spoke on whether SIP investment or investment through ELSS was the right way to go for investors.
Q: I am having HDFC Tax Saver Growth Fund and Franklin Templeton Tax Shield. I have been holding them for last 4 years. HDFC Tax Saver Fund, it’s almost doubled its value. I invested Rs 40,000, its value is about Rs 75,000 or so. So I want to know whether I should book profit, I mean should I sell them and then I reinvest them through SIP or I continue to hold them. I don’t need money that I should sell it.
A: I think both the funds were probably made as ELSS investments a few years ago. I would encourage you to think about what kind of a financial goal you had set aside this amount of capital for when you first invested. Just because a fund has doubled doesn’t mean that the fund is necessarily expensive at this point in time.
On the contrary, there still might be a lot of value that the fund can offer for you if you continue to hold going forward. You also mentioned you have got certain other funds in your portfolio. Think about which are those funds you might want to get rid of and consider any decision you make looking at your portfolio holistically rather than just looking at one particular type of fund that you hold at this point in time and considering an exit out of that because it doesn’t really make any sense just because the funds doubled in value. It could double from this point forward as well just given the long term potential for the Indian market.
Q: I would like to invest Rs 1.5 lakh to Rs 3 lakh in mutual fund in bulk for the horizon of one year, minimum one year. So is it a correct time to invest in mutual funds?
A: I think one year is definitely the wrong time period to be thinking about if he wishes to invest into equity mutual funds. On the other hand, if he is looking just to park his money that he claims he has in bulk at this point in time into some kind of ultra short term fund or a debt fund, one year might be advisable, rates are also going up so he can get some benefit of that if he were to invest correctly.
But if he has already got 7 different equity mutual funds I am assuming then he ought not to be investing into a new fund. There’s always a risk that retail investors face of getting overexposed to a certain sector just because they end up investing in 7 or 8 to 10 different funds that ultimately end up owning the same underlying securities.
So he should just be very cautious about putting money into a fresh new fund but rather just invest in the pre-existing funds that he already holds and think about his time horizon very very cautiously.
Q: At this point of time given the volatility, given the kind of global concerns, are you advising clients more to opt for the SIP route or if somebody has a long term horizon of 4 to 5 years, you are pretty okay telling him that you can put it in bulk as well?
A: It’s only with hindsight that one can recognize whether one got one’s timing right when one puts in fresh money into the stock market. For retail investors, I think it’s always advisable and perhaps preferable to put money through a systematic investment plan route rather than just put bulk money in.
Often retail investors also don’t have too much of surplus cash just lying around if they are salaried individuals. So if you are looking to invest money into the stock market going forward given the existing context of global volatility and so on, the SIP route is probably the way to go for you.
Source : Money Control
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Category: Mutual Fund, Personal Finance
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