Your Queries: Equities tend to deliver positive inflation adjusted returns in long run

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March 17, 2020 1:30 AM

Investment gains (in absolute terms) depend on the principal corpus invested and the returns delivered by the fund. Returns are a function of the performance of the asset class invested in.

At a fund level too, the performance has been subdued with the median SIP return for the large-cap category being 4.09%, while that for the mid and small-cap categories being 2.81% and -1.67% respectively. At a fund level too, the performance has been subdued with the median SIP return for the large-cap category being 4.09%, while that for the mid and small-cap categories being 2.81% and -1.67% respectively.

My current value of SIP in mutual fund after three years of investing is just Rs 5,000 more than the principal invested. Should I withdraw the full amount and invest somewhere else?
—Manoj Pant
Investment gains (in absolute terms) depend on the principal corpus invested and the returns delivered by the fund. Returns are a function of the performance of the asset class invested in. The trailing 3 -year SIP annualised returns in equities have been sub-par with the large cap index (BSE 100) delivering 3%, while the mid-cap (BSE Midcap) and small-cap (BSE Smallcap) segments delivered -2.23% and -6.46% respectively. At a fund level too, the performance has been subdued with the median SIP return for the large-cap category being 4.09%, while that for the mid and small-cap categories being 2.81% and -1.67% respectively. Factors such as the slowdown in the economy, high valuations and the recent advent of the coronavirus have weighed down on equity markets denting performance.
You may remain invested in the fund(s) if you have a long investment horizon, as equities tend to deliver positive inflation adjusted returns in the long run. Also, evaluate the performance of the funds in your portfolio vis-à-vis that of their respective category peers. If a fund has been delivering below average performance on a consistent basis, you may switch to a more consistent one.

Is it mandatory to do a KYC again to open another SIP with a different mutual fund company?
—Raminder Singh
No, a KYC compliant individual is not required to go through the KYC process again when starting SIPs with different mutual fund houses. All mutual funds have facilitated a centralised platform through CVL, NDML, DotEx, CAMS & Karvy to carry out the KYC procedure on their behalf.

I want to invest Rs 10,000 every month in SIP. Should I open three SIP accounts to diversify the portfolio?
—AR Kalpesh
You would need to register the SIPs separately for investing into different funds. It is advisable to diversify investments across 2-3 funds to mitigate concentration to a particular AMC or fund manager’s style/bets.

The writer is director, Investment Advisory, Morningstar Investment Adviser (India). Send your queries to fepersonal finance@expressindia.com

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