Managing your Systematic Investment Plans (SIPs)

Published On: 03-Jan-2020

Systematic Investment Plan (SIP) has clearly emerged as preferred investment route for investing in mutual funds especially for investing in equity-oriented funds. This trend is visible from the relatively stable monthly SIP inflows. As per AMFI (Association of Mutual Funds in India) data, monthly SIP flows have continued to stay above Rs. 8,000 crores for the last 11 months and the SIP inflows during November 2019 were Rs. 8,273 crore. This data reflects that the retail investors are continuing to invest across the market phases and sticking to the financial discipline of investing through SIPs. 


So, while the retail investors are reaping the benefits of rupee cost averaging by continuing their SIP investments, here are a few tips to further manage the mutual fund investment portfolio created through SIPs:

1. Linking financial goals with Investments

This is one of the best ways to continue to invest regularly. When you link your financial goals with your investments, it tends to create an emotional connection to incentivise regular investing. Further, aligning the specific financial goals will also help the investors define their investment horizon, which will ease the decision-making process amongst the different mutual fund schemes available.

2. Top-up SIP

The monthly disposable income in the hands of investors generally increases over time. However, most of the investors tend to ignore such an increase in revenue and do not proportionately increase the investment amount. Choosing an SIP top-up will help in accelerating the wealth creation process over a period of time, as investors save a much higher amount than the initial goal. Therefore, such SIP top-ups may help cushion one's financial goals for early achievement and enable them to set higher financial goals.  

3. Clubbing Regular Investments and Tax Planning

Registering SIP in Equity Linked Savings Schemes (ELSS) may help the investors to club their tax-planning and wealth creation goals with a single investment product. With the inherent benefits of lowest lock-in period of 3 years from the date of investment relative to other conventional ELSS options and with potential of wealth creation, ELSS has been helping the investors to avail benefit up to Rs. 1.50 lakh per year under Section 80C of the Income Tax Act, 1961. 

One must manage SIP portfolio efficiently, especially in ELSS, since any investment amount higher than the tax-saving limit will still be subject to a lock-in period of three years. However, the ELSS investments are not required to be mandatorily redeemed at the end of lock-in period, and one may continue to hold investments post the 3-year lock-in period. This will help to stay on the course of achieving one’s long-term wealth creation.

4. Reviewing Portfolio Performance

Generally, the investors consider investing process to be over once they register a SIP with mutual funds. While taking a step towards regular investing is a welcome step, investors must periodically review their investments' performance. This also assumes importance for the investors, as they may take necessary steps to replace the underperforming schemes with better performing schemes on a timely basis. Further, the investors may need to make higher investments to achieve their financial goals in the desired time frame, as the lesser-than-expected returns for the investment portfolio in the earlier years may cause a compounded impact on the achievement of the financial goals.

Just like any other investment product and investing strategy, Systematic Investment Plans (SIPs) in Mutual Funds also need periodic care and nurturing. As such, aligning your investment portfolio and SIP investment strategy results in better execution of your financial goals and financial plans. 

Disclaimers: The information set out above is included for general information purposes only and is not exhaustive and does not constitute legal or tax advice. In view of the individual nature of the tax consequences, each investor is advised to consult his or her or their own tax consultant with respect to specific tax implications arising out of their participation in the Scheme. Income Tax benefits to the mutual fund & to the unit holder is in accordance with the prevailing tax laws/finance bill 2017. Any action taken by you on the basis of the information contained herein is not intended as on offer or solicitation for the purchase and sales of any schemes of UTI mutual Fund. Please read the full details provided in SID and SIA carefully before taking any decision.

UTI AMC Ltd is not an investment adviser, and is not purporting to provide you with investment, legal or tax advice. UTI AMC Ltd or UTI Mutual Fund (acting through UTI Trustee Company Pvt. Ltd) accepts no liability and will not be liable for any loss or damage arising directly or indirectly (including special, incidental or consequential loss or damage) from your use of this document, howsoever arising, and including any loss, damage or expense arising from, but not limited to, any defect, error, imperfection, fault, mistake or inaccuracy with this document, its contents or associated services, or due to any unavailability of the document or any part thereof or any contents or associated services.