How Secure Your SIP Investment this election?

The general election 2019 is around 6 months away, but many mutual fund investors actually are very much concerned about it. They’re bombarding the mutual fund managers and advisors with several questions like: `Do I need to make any changes to my mutual fund investments or what investment strategy should I make for the upcoming general elections 2019?’  “What my mutual fund's investment strategy should be ahead of elections is one common question that we get from the retail investors, when we interact to them around election time. General elections are to be held from April to May 2019 for Lok Sabha.

Kotak Mutual Funds have decided to have a close look at the SIP plans around some previous elections just to know whether mutual fund investors have to alter the investment plans before elections. We looked at BSE Sensex for 6 months around election time for past 5 general elections that were held at 1998, 1999, 2004, 2009, and 2014.

Here’s what we have found: The mutual fund market moved up in 3 elections in 1998, 2009 and 2014. Actually, in the year 2009, the market saw 2 upper circuits in one single day after election results were declared. Election results in the year 1999 and 2004 pulled down the stock markets. Benchmark index fell down by 11% on a day election results got declared in the year 2004.

Regardless of any upward and downward trend, the Sensex chart remained very volatile during election time. There is no wonder, the mutual fund advisors and managers ask the investors not to alter the SIP plans and strategies ahead these elections.

The general elections will happen in every 5 years. And, from 1980 to 2014, we have actually seen all types of governments, which include absolute majority government and mixed governments. The average GDP growth also stood at over 6.2 percent over 34 years. Suppose we keep this expectation in mind, and then elections don’t matter much to your SIP plans. Suppose our country grows to about 6% every year, then which government rules, doesn't matter much.

Most of the financial planners and mutual fund advisors point out that our country has actually gone through all types of disturbances, which includes the unexpected election results, trade wars, depreciating rupee, crude rates going high and more. They say that elections may act as the temporary dampener or improve sentiments in a short term, however in a long term, the investors do not have to worry about their SIP plans.

The long term investors do not have to worry and change the strategy because of general elections of 2019. Investors should follow the disciplined approach to their SIP plans and stick to the asset allocation. However, because of high volatility, it is not the right time to actually invest lump sum. Suppose an investor wants at 6 percent (GDP growth above 34 years) and 4 to 5 percent inflation, we don’t see it as the difficult growth rate you can achieve in your SIP plans. 

Thinking of investing in the mutual funds and build the retirement corpus, here’s what you need to know.

Conditions in which SIP Plans will yield good results

The SIP plans will ideally yield you positive results under the following conditions:

Bull and Rising Market: SIP plans will yield good results in either a rising or bull market as each new purchase, though made at the higher rate, is valued at a higher price. But, like seen earlier, in this case, it will be good to buy a whole investment lump sum instead of "averaging upwards" through SIP plans.

Volatile market condition: SIP plans must finally perform very well in the volatile but bull or rising market. It will be a market kind where "rupee cost averaging" will work very favorably for an investor as volatility will lead to the possible average price. Final increase or the bull market will make sure that an end price will be higher than an average price.

The market in the Median range corrects any downwards and moves up: It will be a case where SIP plans will perform very well and looking at all conditions better than the initial lump sum SIP investment. It is because an investor can get the help of an intermediate correction for "lowering his cost".

However, does it mean that SIP plans works in all market conditions? Possibly No. Let’s now check the market conditions in which SIP plans will not work. Thus, it is proved beyond any doubt that the SIP plans may not always be the best investment route. Thus, it is better we move forward and check out when will it be an ideal time to invest via SIP plans or when only buy this lump sum.

Final Verdict 

The SIP plans work on a principle of the regular investments as well as brings the power of compounding ahead. This removes uncertainty and tensions from the investment plan just by making it the mechanical boring procedure. It inculcates a habit of savings and doesn't encourage speculation or timing of the markets. These are all accepted and correct facts.

However, do not forget that SIP plans are just one method of investing in the mutual funds, it is the vehicle, not a final destination - it might pass through the bumpy roads or straight road – but it will lead you to the destination is the lesser or at times higher time period - and sometimes this might also not lead you towards your destination just by derailing your SIP plans. SIP is a method to get on to your investment vehicle and reach your destination – suppose vehicle you select is incorrect – then whichever way you get in- there’s less chance of reaching to your destination. Thus, next time when the mutual fund or financial planner or distributor tells you that the SIPs are the safest route of investment in the equities then keep in mind they aren’t telling lies – it’s the safest route not for an investor but for own selves.

Get Good Returns By Investing In The Best SIP Plans in 2019

Investing in SIP mutual funds has actually become quite popular nowadays. The mutual funds are created when many corporations' pool in the securities to make a fund. The biggest benefit of a mutual fund is investor will be able to minimize their risks by diversifying their assets. So, loss in one investment hopefully can be covered up by profits of another. The stock market will fluctuate suddenly and can cause heavy losses or high returns that depend on the situation. Diversifying your portfolio means reducing your risk of loss just by distributing all your investments than keeping your eggs in just one basket. This is precisely why the mutual funds provide wonderful investment goals.

What’s a SIP?

SIP is one specific amount that is invested for a long period at the regular intervals, normally on the monthly basis. With this method, the investor buys some units of the scheme at the pre-decided frequency. Systematic investment plans help the investors to participate in a stock market, prevent any need to time a market, and bring discipline to the investment methodology. Now, it is possibly done with the mutual fund investments as well. SIP or Systematic Investment Plans help you to invest the fixed amount each month or quarter. Therefore, it helps to spread our investments with time.

Features of Systematic Investment Plan 

For the long-term wealth formation in the equity market, you require long-term horizon and discipline that are inbuilt features of investing in SIP. Following features of the SIP will make this fit for the equity market.

Investment possible with the small amount of money invested often to accumulate wealth

The easy and disciplined way towards investment

Flexibility in the terms of Quantity or Amount based SIP

Flexible intervals such as Daily,  Weekly,  Fortnightly or Monthly basis

Based on Rupee Cost Averaging concept

SIP is quite beneficial and best investment option. Let us see why:

Discipline: More you invest, better will be your chances to get success in the long-term. It includes investing a little early on in life. But, it is very tough to form a habit. You might end up in over-spending and forgetting to invest. But, SIP will help to inject discipline and invest regularly. As SIP will automatically debit money from your account, so you do not have any chance to forget your investment.

Power of compounding: There’s one reason why you’re advised to invest very early. When you will make an investment, you will earn profits in terms of profits from the sale/dividends or interest payments. The first one will get credited in your bank account, and where they then will earn the interest. With time, you will make interest on the interest payments as well. It amplifies your profits. For this reason, many investors prefer to reinvesting the interests and profits instead of using this for expenses. But, SIP helps you to tap in this power of compounding just by increasing the duration of your investing, although it is in the small amounts.

Choose your investment: With SIP, you may tailor your investments that will fit your profile. Also, you can choose the scheme, amount you are looking to invest and a number of Kotak mutual funds units that you want to buy. Suppose you fix an amount in rupees, the number of units that you buy every month may change. In the same way, if you choose to buy the fixed units, the amount you will pay every month might differ. In any case, it will fit your bill.

Cost averaging: It is one key benefit of SIP. In a stock market, one thing that is very important is timing. Same stock or mutual fund will be available at the different rates on the consecutive days and months. SIP helps you to reduce the average investment cost. 

Small investors: Often, there’s the minimum threshold when investing in the Kotak mutual funds. It can differ from one fund to another. It can act as the barrier for the small investors. With SIP, you can start with as small as 500 or 1,000 Rs.

Best SIP Mutual Funds in 2019 

SIP is one highly efficient ways of investing in the Kotak Mutual Fund schemes. With SIP, you can automate your investments every month. You can also spread your Kotak Mutual Fund investments with time in the fixed monthly installments. Thus, you can easily invest a small amount every month at the regular intervals and accomplish your goals. 

The goals can be marriage, retirement planning, purchase of a car or house, can all be fulfilled just by taking a SIP route. Because of its investment style, systematic investment plan is the best tool for investing in the equities. It balanced pitfalls of an equity market. It makes sure complete stability during the turbulent market conditions. Some benefits of SIPs include: 

Power of Compounding 

Rupee cost averaging 

Builds the habit of the long-term savings 

Investors who are very keen on investing in a SIP, then Kotak Mutual Fund is the best option for the year 2019. The funds are shortlisted by undertaking some parameters like NAV, AUM, peer average returns, past performances, and more. 

Choosing Right Companies for Your Investment

When you've decided to go the SIP way, then the next question that comes up is a stock selection. Number one rule is going for the companies that you would like to own when given a chance. There are some stocks that are good for SIP way of investing. And these are the stocks we must accumulate, in the small steps since they represent the long-term value. They’re companies that have the proven track record. Such companies have the solid, ethical and stable management and function in the profitable area with the long-term prospects.

Conclusion

Suppose you don’t want to invest for equity SIP then you can select the Kotak Mutual Funds where you will be relieved of individual company research. Thus, the points mentioned will help you to opt for the right mutual funds and make a worthwhile decision.