I want to invest Rs 3,000 in SIP. In the current market scenario, should I invest in large cap or mid-cap funds?
—Mahesh Arkar

SIPs allow an investor to deploy the principle of rupee cost averaging to take advantage of market volatility. When the NAV of a fund is high (typically when markets have risen) fewer units of a fund would be purchased from the investment amount and when the NAV is lower more units of a fund would be purchased with the same investment amount, thereby reducing the average cost of units purchased over a period of time. Hence, if you intend to invest through SIPs over a long tenure (5-10 years), then you could divide the allocation between a large cap and mid-cap fund, perhaps in equal proportion or 60:40 in favour of large caps based on your risk appetite. Alternatively, you could invest in an equity diversified fund that invests in a mix of large, mid and small caps in a proportion based on the fund manager’s views.

I am investing Rs 10,000 in a SIP where the minimum time of investment is one year. After investing for six months, I want to reduce the amount to Rs 5,000 now. Can I do that?

—Suhas Harinarayan
Typically, most funds require a minimum of six SIPs before one can discontinue or make changes to the amount, etc. You would need to find out the terms of your SIP investment with the respective AMC.

If I go to a branch office of a fund house and invest in SIP by giving ECS mandate, will that be treated as a direct investment with lower charges?

—Pankaj Maheshwari
While investing in a mutual fund scheme (either via SIP or other modes) typically the application form includes a section on the investment and payment details wherein one needs to mention the scheme name and select between the regular and direct plan options. If one wishes to invest in the direct plan, the option needs to be selected and / or mentioned. Further, one should mention ‘Direct’ under the ARN column of the form.

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