Tuesday, September 23, 2008

Shall I stop SIP and Invest in FDs

Ms.SUMA wrote :
this is what i have done in the past month.
1. discontinued SIP in franklin flexicap growth...i would prefer to remain invested for now.
2. discontinued SIP in hdfc top 200, would prefer to remain invested.
3. discontinued SIP in reliance diversified power fund...would prefer to remain invested.
4. continuing SIP in DSPML TIGER growth
5. remaining invested (relatively small amounts) in hdfc equity, reliance vision, and tata infrastructure.

i plan to put the discontinued SIP money in FDs for now.

Is all of the above on the right track, given my low appetite for risk and the current market conditions? i cannot invest directly in equities as my employment contract forbids it.

Thanks.

SRIKANTH SHANKAR MATRUBAI'S REPLY ::::::



Dear Suma,
Your stoppage of sips in Franklin Flexicap and Reliance Diversified Growth Fund are very good investment decisions and did deserve to be done. But stopping in HDFC Top 200 Fund was not such a wise decision. Reverse your decision at once and continue the same.

You should also stop your sip in DSPML Tiger Fund, as you already have a Infra fund in TATA Infra. Please avoid Sector/Theme Funds. These funds tend to underperform Diversified Equity Funds over long term.

Investing in FDs instead of SIP is an absoulte disaster. FDs will eat your principal itself when you consider Inflation. People buy more Gold, more Real Estate when their prices go down, but When Stock Prices/Fund NAVs go down, people do the reverse, instead of buying more, they not only stop buying but even SELL! What an irony.

Bearish markets are the best time to buy stocks/funds. The basic lesson in investment is BUY when valuations are attractive and sell when they are not. When markets fall, when problems in economy are temporary in nature (like they are now), they provide an opportunity to accumulate stocks at attractive levels. These are one of those times.

Please do start your sip in Good Diversified Equity Funds as early as possible.

Best of luck,
Srikanth shankar Matrubai

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