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Investing Intensity

Choosing good funds is half the story, staying the course and mapping the exit is crucial too

For two years now, I have been investing, through systematic investment plans (SIPs), in three funds. These are: IDFC Premier Equity, Kotak Sector Opportunity and Reliance Growth. Did I choose the right funds?

Your fund selection is good. All three funds have performed well over a period of time. And since you have been investing via the SIP route, your investments have experienced an entire market cycle, which would have added to your knowledge and understanding. Therefore, if you do not need the money for the next three-four years, then you should keep on investing.

You must evaluate the performance of the funds at least once-a-year. And once you near the approximate time that you need to redeem the money, start withdrawing in a systematic manner over a year’s period.

I want to invest Rs 1,000 per month for a period of five years. Where should I invest and what is the meaning of dividend and growth?

It is ideal to invest in a balanced fund like HDFC Prudence, UTI Balanced Fund and DSPBR Balanced Fund. These are some of the good options available. 

There are three options available to an investor. These are: growth, dividend and dividend re-investment. 

Dividend re-investment option is a tax efficient method and hence more recommendable.

Dividend option: The fund earns income from the profit it makes from investing in securities as well as from earning dividends on those securities. Fund companies offer investors the option of earning some of the earnings by way of dividends. 

Growth option: The fund earns income from the profit it makes from investing in securities as well as from earning dividends on those securities. In growth option, the investor leaves the earned profits in the mutual fund, which gets invested in earning more returns.

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