Before investing in mutual funds, one must have a financial goal & time frame in mind…
By Research Desk | Aug 16, 2011
I am 32 and invest Rs 5,000 every month through SIPs. I can continue my investment up to 15-20 years. I want to know if it would be beneficial to continue investing for 15 years in SIP or will it be beneficial to redeem units whenever the markets go up and at the same time continue investing in SIPs?- Vijay Kulkarni
When investing in mutual funds one must have a financial goal and a time frame within which one wishes to reach the goal. This helps in investing in funds accordingly as well as track the progress of the funds towards one’s financial goals. Ideally one should redeem when one of the three occurs—you need the money, the fund has achieved your financial goal or most importantly the fund has started to fare poorly and there are better investments to consider. You need to ask yourself what you would do with the units that you redeem. If it is going back into investing, why redeem in the first case? The advantage of systematic investments is that it disciplines you to invest irrespective of market cycles thereby averaging your investments. The regular long-term investing also benefits from the power of compounding which is your best bet to long-term wealth creation. Remember to select good funds that are highly rated with performance track record and history and review its progress at least once a year.