With the bull run on, drink stocks SIP by SIP

Fretting about a lost opportunity as the market takes Mt 19000? You could still drink from the equity spring without having to worry about which way the Sensex will head next —- through systematic investment plans (SIPs) of mutual funds.

SIPs allow one to invest a fixed sum of money in the equity markets at regular intervals. So, the money gets invested at various levels of the markets and the highs and lows average out over time, leaving you uniquely positioned to capitalise on future market rallies. You can invest any amount starting from `1,000 a month in equity mutual funds.

Experts feel at the current market levels, SIP is the way to go.
“For fresh investments, one should get into SIP. Also, as the salary levels go up, the incremental amount that one is earning should get into SIP as well,” says Nikhil Naik, managing director of Naik Wealth Planner.

Give these investments a horizon of at least 3-5 years, Naik suggests.

“Under SIPs, you can’t wait,” says Paul D’Souza, another financial planner, who runs Cuzinns Investment Services.
In other words, any time is a good time to start investing, irrespective of the level the market may be at. “The question of asking when to start an SIP is like asking a child when he should start walking. You are not investing for the day, but for a period of time. When you are building a house, you should not think when to put the first stone to build a house. I have put SIPs for customers yesterday, today and will be putting tomorrow,” says D’Souza.
His advice to those looking to invest a lump sum, however, is, “Hold on to your money.”

Tarun Bhatia, director — capital markets at Crisil Research, sings paeans to SIPs. “From a 5-7 years timeframe, the market will reward you. Just to compare, if one had invested in 2003 as a lump sum, then taking into account the current index level, the annual return has been 27%, while the return on SIP has been 19%. But this is because the market has just gone up since 2003.

If one takes a lump sum investment from January 2008 to the present, then one has got 2% (based on the index level), while SIPs have delivered 20%.”

Keeping a long-term investment horizon is the key.
“The long-term outlook for India is positive. On a 3-5 years outlook, India looks attractive,” says Navneet Munot, chief investment officer at SBI Mutual Fund.

According to him, going through the SIP route, one need not try to time the market as the investments will average out eventually. “If you wait for a correction, but the market goes further up, then it will turn out to be the other way.”

Meanwhile, those who had made their SIP investments a long time ago could consider full or partial redemption, say experts.
“If your goal is a year away and you have achieved 90% of your target amount, then you should book profits,” says Naik.

“Those who have invested long ago, say when the markets were at 10000 levels, should book at least partial profits now,” says Jayant Vidwans, who runs Chaitanya Financial Services. But while deciding on the schemes to invest in via SIPs, what should one look at?

“While deciding on the schemes, we look at the rating given to the fund by Value Research or Icra, the fund house that is a consistent performer and the fund manager,” says Vidwans.

“A person shouldn’t enter markets at these levels unless he has a risk appetite. For them, I would suggest HDFC Top 100, HDFC Equity, Reliance Regular Savings, UTI Opportunities, DSP Equity, Morgan Stanley Growth Fund, with a minimum time horizon of 5 years.”

Bhatia of Crisil suggests people opt for the large-cap and balanced funds now. “HDFC Prudent, Reliance Regular Savings Scheme, Birla Frontline Equity, Fidelity India Growth Fund and HDFC Top 200 are all Crisil rank 1 schemes,” Bhatia says. Naik says while deciding the schemes to enter, he also asks his customers which companies they would not want to invest in, just supposing they have had a bad experience earlier.