Navigating the intricacies of mutual funds can often pose challenges, especially when faced with queries regarding existing SIPs or optimizing surplus funds.
Sangram Kumar Dey’s (ET Mutual Funds reader) queries echo common concerns among investors, seeking clarity on enhancing existing SIPs and exploring alternative avenues for surplus funds.
ET Mutual Funds spoke to Vijay Kuppa, the CEO of InCred Money, to address common concerns from mutual fund investors on Systematic Investment Plans, Step-up SIP as well as Sovereign Gold Bonds (SGBs).
Query 1: Enhancing Existing SIPs
Sangram Kumar Dey: I have a few existing SIPs but none of them are step-up SIPs. The AMCs are not providing any way to step up the existing SIPs. Should I start one new SIP enabling the step-up facility or is there any other alternative?Vijay Kuppa: After setting up an SIP, it’s essential to understand that it doesn’t accommodate Top-up or Step-up options once initiated.
However, there are alternative methods to enhance your investments:
1. You can initiate a fresh SIP in the same scheme. You may align the investment date with your existing SIP.
2. As you have mentioned in your query, you can cancel your current SIP and start a new SIP with a Top-up facility.
3. Many third-party Mutual Fund platforms have features where you can modify the SIP amount. Although not identical to a step-up feature, these platforms typically automatically cancel the existing SIP and activate a new one when modifying the investment amount.
Note: A Step-Up SIP (Systematic Investment Plan) is a feature offered by some mutual funds that allows investors to increase their SIP contributions periodically.
Query 2: Maximizing Surplus Funds
Sangram Kumar Dey: I have some amount of around Rs 7-8 lakh to invest. What are the best possible ways to utilize the money (SIP/SGB) except the stock market?
Vijay Kuppa: Considering you don’t want to invest in the Stock market, either directly or through Mutual Funds, here are some avenues for your surplus funds.
With interest rates at multi-year highs, it is an appropriate time to invest in debt instruments. You have the following options:
1. Corporate Bonds: You can invest in Secured & Investment Grade corporate bonds (credit rating from AAA to BBB-) and get yields of 8%-12% p.a.
2. Fixed Deposits: Many banks have hiked their FD rates, and you can get up to 9.25% p.a. returns on FDs of Small Finance Banks and NBFCs.
3. Debt Mutual Funds: You can invest through Debt MFs to get access to a diversified portfolio at a low-ticket size, although the returns can be volatile.
Gold is considered to be a good hedge to other asset classes and Sovereign Gold Bonds are a good avenue for investing. You may invest in SGBs when a new issue comes up or you can even invest through the secondary market.
If you already don’t have one, we also advise you to maintain an emergency corpus equivalent to 6 months of your salary/ income. These funds can be kept in Liquid or Ultra Short Mutual Funds.
Note: Please note that these suggestions are based on the assumptions and information provided. You may consult with a financial advisor for personalised advice.
(If you have any mutual fund queries, message us on ET Mutual Funds on Facebook or Twitter. We will get it answered by our panel of experts.)
