I have noticed that SIP return for the five-year period is considerably lower than three years in most funds. Does this mean that it is better to change/shift your investment to another fund after three years?
- Dilip Khichade
Five-year Systematic Investment Plan (SIP) returns need not be always lower than three-years. The returns in a particular period depend on how the market has performed in that period. At the moment, the three-year performance of the stock market is greater than the five-year period, the returns merely reflect the trend.
It is not a great idea to change or shift your investments every three years simply because of a random trend in the market. You should change or shift your investments in an equity mutual fund only on two occasions. First, when the scheme underperforms its category and peers consistently over a year or more and you are not satisfied with the reason behind it. Two, you should shift your equity mutual fund investments to a safer avenue at least a year or two before the financial goal. This will ensure that your money is safe and your plans won't be affected by a sudden volatility in the market.
This article was originally published on October 13, 2015.
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