Mutual Fund NEWS Group

Monday, November 14, 2011

Can other asset classes outperform the equity market over the long haul?

The volatility in equities, both local and global, has prompted many investors to exit equities and shift to other asset classes such as gold and commodities. But is this a desirable shift? Can other asset classes outperform the equity market over the long haul?

In this edition of the ET Investor's Guide Quarterly Mutual Fund Tracker, our panel of experts provides a perspective on the state of the market and their views on other asset classes, in interviews with ET.

QUESTIONS

Q1: Where is the Indian equity market headed given the current global uncertainties?

Q2: How will equity investments fare as an asset class?

Q3: How will the global equity market perform?

Q4: Will gold as an asset class outperform?

Q5: Will real estate investments pay off?

Q6: Is commodity investment a sensible option?

Q7: How much should an investor set aside for personal investment?

ANSWERS

SANDESH KIRKIRE, Chief Executive Officer, Kotak Mahindra Asset Management

1. We have seen these similar market levels in 2007 last quarter. But if you see the valuations, the market is much cheaper today. The domestic consumption part of the economy is doing well. What, however, is not doing well is domestic investment, especially in the infrastructure space.

And a lot of reasons can be blamed for it - policy paralysis, high interest rates resulting in corporate India going slow with projects etc. But from a retail investors' perspective, these are the times one should be looking at for investing for a long period.

2. Buying equity means buying ownership of the company and for an owner shortterm hiccups should not be a great botheration. If investors look at the performance of systematic investing in equity MFs over 8-10 year period, huge wealth has been created. Investors should look at that kind of a time frame. If you do not have that kind of an investment horizon, you should not be looking at equity.

3. One needs to select a right market to invest. Developed markets struggle to outperform the emerging ones. India is one of the fastest-growing economies. So I guess majority of investment should be centred here. But some exposure can be taken in the international markets.

4. Gold as a commodity has no use other than hedging. Unlike other commodities, it has no commercial usage. One cannot put a lot of money in gold but some investment is desired as gold is a hedge to global financial markets.

5. Real Estate is not accessable to a retail investor. You have real estate funds that are not retail in nature. As far as physical purchase is concerned, it is difficult to transact in property. I am not sure if real estate is a viable investment option for a retail investor. If one is buying for capital appreciation, firstly it is difficult to liquidate and secondly this asset class may not see growth for a long time.

6. Commodities are purely leverage. When one is buying commodities, one is buying future. The impact on correction is massive. It's like borrowing money to play in the market. I don't think a retail investor should even think about it. Commodity prices are influenced by something happening in some part of the globe. To illustrate, oil demand has gone up 3% from October 2008 till date but oil prices are up 300%. This financialisation of commodities market is harmful.

7. About 50-60% of my portfolio is allocated to Indian equities while 35-40% is in fixed income products that include bank deposits. Investment in gold would be around 5%.

SHANKARAN NAREN, Chief Investment Officer, ICICI Prudential Asset Management

1. The market will be volatile due to the events in Europe. As far as the domestic economy is concerned, the monsoon has been the single biggest positive phenomenon, which has helped agricultural production. But high crude oil prices are clearly a negative for the economy. The direct tax collections have also been disappointing. As far as inflation is concerned, our guess is that the worst is over and the rates should move southwards by March 12.

2. Valuations are pretty attractive in the domestic market today. This is a good opportunity for investor to increase their allocation to equity systematically though SIPs and STPs. Overall investment trend in India shows that Indian investors are grossly under invested in equities vis-a-vis other asset classes.

3. In a volatile scenario, the more number of asset classes one has diversified the finances into, the better. Certainly, one should allocate investment in both domestic as well as international markets. This will give you a different pay off.

4. Gold is an asset class, which does well when global economies get into trouble and poorly when globally economies are fairing better. Although it is not a very new asset class for Indians, a view on this asset, for investment allocation is not very easy.

5. Real estate as an asset class is for the affluent. The prices are off the roof not only in the metros but also in the other smaller cities making this asset out of bound for most investors. My guess is that retail investors should look at equities as an investment avenue instead.

Having not delivered in the past four years, valuations in the equity market have become quite attractive. Alternatively, they can also look at fixed income instruments, at least till the time the interest rates begin to cool off.

6. It is difficult to comment on commodities as a pure asset class though we do invest in stocks of companies related to commodities.

7. Equity, both domestic and international, form the core of my investment portfolio followed by fixed income products. I do not invest in real estate and gold. Moreover, being unsure of commodities as an asset class, I have kept myself far away from it.

ASHU SUYASH, Country Head & Managing Director, India, Fidelity Worldwide Investments

1. The markets will be range bound for a while. But what is important here is that we do not anticipate any 2008 like downfall and this gives a lot of opportunities to the investors to invest provided they can stomach the volatility.

2. Clearly you cannot expect 60-70% kind of returns that you had after the recovery, but if you had to look at beating the inflation, which itself is 9%, no guaranteed fixed return product adjusted for tax is going to give a positive upside. Taking that into account, the mindset needs to take on board certain risk. And if one is ready to take on board this risk and volatility, equities are still appealing.

3. You cannot put everything in India nor all in the international market. Last year India was among one of the best performing markets, today it is among one of the worst performers. FIIs are optimistic on emerging markets and not only India. India's economic growth rates are very high today but the base is small compared to the US. Developed economies with large base and slow growth rate are not as volatile as we are. International equities can thus be considered for diversification.

4. Today everybody is willing to invest in gold without giving a thought that how soon are we going to see a similar rise. Gold deserves some allocation but one cannot go overboard investing in gold. While gold has outperformed, it has not outperformed equities over a longer haul. Investment in gold is a flight to safety and not to generate wealth.

5. Real estate for me is the necessity to own a house. Beyond that, I think there is nothing like mark to market in real estate because it is one of the most opaque markets and very difficult to liquidate in times of need. So, the big gains that we see on property will be of no use if one really needs the money but is unable to sell the property.

Unfortunately there are not enough liquid financial asset classes linked to real estate. So while real estate does deserve merit in the overall net worth of the investor, but beyond that I would personally worry if I had to put my retirement money in a house.

6. I doubt if retail investors in our country really understands commodity as an asset class. One should not invest in something one is unsure about and where you neither have historical data nor forecasts.

7. I am predominantly a mutual fund person. The largest allocation of my portfolio goes to equity mutual funds, including some offshore products available in India. For fixed income, I have a roughly even allocation to cash funds and bank deposits and a small percentage allocated to gold.

NAVNEET MUNOT, Chief Investment Officer, SBI Asset Management

1. The equity market is expected to remain volatile on account of the events in the euro zone as well as the macro economic headwinds in the domestic market. However, while markets will continue to be range-bound, the valuations currently are fairly attractive for longterm investment point of view.

2. Given the kind of volatility, overall allocation to equities has gone down over the past couple of months in favour of other asset classes like gold, real estate and fixed income. Investors, however, should use the current volatility to their advantage and build their equity portfolios, as valuations are extremely attractive.

3. For retail investors, given the longterm opportunity in India, the focus should be domestic market. However, high net worth individuals, who have a larger portfolio and need to diversify to different geographies can invest 5-10% of their portfolio in international equity market.

4. It would be foolish to look at Gold as an investment option for absolute returns now since it has seen a lot of run-up already. However, one may use it as a hedge in their portfolio against any major turmoil in the capital market. So in my view, an allocation of 4-8% should more than suffice.

5. It's difficult to generalise on investment in real estate. It depends on many parameters like the location of the property. Moreover, liquidity is always an issue with this asset class. Notwithstanding the fact that real estate has witnessed a lot of capital appreciation over the past few years, it is nevertheless a difficult and inconvenient investment option.

6. Commodity as an asset class is a good investment. However, being cyclical in nature, it makes sense for a retail investor to invest only if he or she closely tracks its movement. Another issue with investing in commodities is the absence of easy accessibility. Except for Gold ETFs, we do not have good vehicles to facilitate transaction in commodities.

7. Nearly 50% of my savings go to equities and a major chunk of the rest to fixed-income products. Gold is only for hedging and I allocate roughly 2-4% to this asset class.

Source: http://economictimes.indiatimes.com/articleshow/10706341.cms?prtpage=1

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'I made my money by selling too soon.'

Website: http://indianmutualfund.co.cc/

Blog:http://indianmutualfund.wordpress.com/
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Thursday, November 10, 2011

Uniform know-your-customer likely for entire financial sector

Soon, you may be able to buy mutual fund units, shares, insurance policies, bank deposits and other such financial products with a single Know Your Customer (KYC) compliance.

Financial Intelligence Unit-India (FIU-Ind), the national agency monitoring suspect financial transactions, has initiated discussions with different financial sector regulators to build a common database, which could be utilised by all financial services agencies.

On the sidelines of a conference, P K Tiwari, director, FIU-India, said: "The recent move by the capital market regulator, providing a common KYC for all securities market products, is a good initiative. It should be expanded across all other segments of the market."

At present, each sectoral regulators -- the Securities and Exchange Board of India (Sebi), Insurance Regulatory and Development Authority, the Reserve Bank of India, Pension Funds Regulatory and Development Authority and the Forward Markets Commission have different KYC requirements. This means users are now required to fill in numerous columns in multiple forms every time they buy a new product.

"How many cards am I supposed to carry? In countries like Hong Kong, there is only one. It serves all the different purposes. But here we have PAN, TIN and UID. Each agency wants to promote its own product as the valid proof, creating duplication. If this could be avoided, it is welcome," said a chief compliance officer of a public sector bank.

Also, the data is collected and stored separately, thereby not giving a complete picture of a client's financial history to the intermediaries. This affects the quality of suspicious transactions' reports sent by these entities to the FIU.

"If there is a common repository, the principal officers would be able to access and check the client's transactions in other regulatory domains. This will enable us to form and relay a more informed opinion to FIU," said John Mathews, senior vice-president and head of client services, HDFC AMC. He said the system introduced by Sebi, to take effect from January 1, would be a good model.

In July, Sebi said the initial KYC would be undertaken only once for capital market products like mutual funds, shares, etc. It proposed a mechanism wherein one or more regulated KYC Registration Agency (KRA) would undertake a KYC exercise at the stage of account opening for all clients.

The benefits of a KRA system include the execution of a single and uniform KYC procedure across the securities market, saving of record-keeping space, a centralised storage and dissemination of data. Specific criteria and rules to identify 'beneficial ownership' is being worked out jointly by Sebi and a committee set up by the finance ministry.

It will also help in saving time and burden of procedures for clients, by undertaking the KYC procedure of identification only once, subject to periodic update.

This common KYC database will help the different regulators and intermediaries monitor suspicious transactions and terrorist financing more efficiently, experts said. However, there are some practical difficulties. Vikas Tandon, director-anti money laundering, South Asia, Citibank, said the financial inclusion objective of the government should also be kept in mind. "In capital markets, the PAN (income tax identification) has been accepted as the universal proof and made mandatory. However, in other areas this may not be possible. For example, banks have the obligation of financial inclusion. Such differences need to be addressed."

Indian financial institutions are expected to spend $1 billion (Rs 4,900 crore) in the next few years to strengthen the systems and processes for anti-money laundering measures. According to a study by the United Nations Office on Drugs and Crime, the estimated money laundering flow globally is close to $1.6 trillion, about 2.7 per cent of global GDP.

Though there is no specific data available for India, experts estimate the amount of money laundering to be one to two per cent of domestic GDP. "There are high levels of suspicious transactions. India is now doing what Singapore and Malaysia had done a few years before in implementing strong AML measures," said Mr Ian Selbie, solutions programme director for the Asia-Pacific at Unisys, a firm specialising in anti-money laundering and anti-fraud measures.

The financial industry will have to spend close to $100 million in installing the necessary software and together with training and other process, the required expenditure will be at least $1 billion.

Source: http://www.business-standard.com/india/news/uniform-know-your-customer-likely-for-entire-financial-sector/454911/

Tuesday, November 8, 2011

Mutual funds to disclose big distributors on websites from Nov 10

In order to improve transparency, market regulator Sebi has asked all mutual funds to disclose names of distributors, who receive commission in excess of Rs 1 crore annually, on their websites.

The fund houses, according to a Sebi circular, will have to disclose names of distributors having presence in more than 20 locations or those who have received over Rs 1 crore commission in a year. They would also have to disclose the amount of commission paid to distributors.

The disclosure, which would also be uploaded on the MF industry body AMFI's website, would be mandatory from November 10, it added.

The industry players feel that the move is aimed at tracking the payouts to big distributors like global and domestic banks and large independent financial advisors.

Distributors earn a upfront commission from the mutual funds in the first year which is generally higher for selling equity schemes and lower for debt schemes.

Further, they also earn a 'Trail Commission', which is a percentage of total business brought by the distributor. This commission is paid in the subsequent years and accounts for a huge earning for the distributors.

Securities and Exchange Board of India (Sebi) Chairman U K Sinha had earlier this year said that the regulator would take steps towards regulating the mutual fund distributors.

The Sebi board had also decided that as a first step towards regulating distributors of MFs, selected distributors will be regulated through Asset Management Companies (AMCs) by putting in place the due diligence process to be conducted by AMCs.

"Our initial attempt is to regulate the distribution industry. We tried to cover those distributors whose contribution to the industry is material. We propose to cover about 50 per cent of the asset under management (AUM) of the industry," Sinha said.

Source: http://articles.economictimes.indiatimes.com/2011-11-03/news/30355153_1_distributors-upfront-commission-trail-commission

Important that people invest systematically

Milind Barve, Chairman, Association of Mutual Funds of India (AMFI), speaks to Tanvi Varma on the industry's future and the current maket scenario.

AMFI recently launched a new campaign to promote mutual funds. What is the objective of this investor awareness campaign?
Literacy levels In India are low and financial literacy even lower. So, the opportunity lies in not getting more money from existing customers but to start telling prospective investors about different savings and capital appreciation products.

A part of the theme in the ad is that saving regularly pays. An important message of the campaign is, "Ho sake to har mahina bachat karo," putting emphasis on disciplined investing. The campaign also tries to tell investors to check out the various fund options that are available.

The third message is that investors should visit a financial advisor. It is very important to invest systematically with proper guidance.

Considering the current economic and financial environment, within India as well as globally, should one alter his investment strategy?
There is consensus that the current economic and macro environment is more complex than in 2008. Nobody knows what exactly is the problem or the solution. We have to wait for things to unfold. India's GDP growth model is fairly domestic-driven and less dependant on global growth.

But, our financial markets are dependent, considering that the foreign money that comes in and goes out affects prices. Apart from fund flow, global market news affects our markets even though the events have no correlation to the Indian economy. Having said that, one should look at the larger picture, that is, our GDP growth is a secular 7.5-8%, and strong compared with the rest of the world.

Therefore, in the long run, equity as an asset class will give superior returns, barring the unpredictability at the short end. Further, with tax benefits, the entire return over a period of five years is totally tax-free. Therefore equity should have a place in everyone's asset allocation, with the percentage varying depending on financial goals.

When should one invest?
Do not buy at the peak and sell at the bottom. Now, this is relative to past performance. One should look at the long-term PE multiple. For instance, in India, the long-term PE multiple has been 18x earnings, and currently we are trading at 12x-13x 2013 earnings, indicating we are closer to the bottom.

When we move towards 20x earnings, we are above the long-term average and hence on the expensive side. Investors have also become wise. Data suggests that when the markets came down, the industry sees positive net sales. The average inflow and outflow is 1-2% of the total monthly equity assets under management (AUM). The AUM of equity schemes are about Rs 2 lakh crore and a change of Rs 2,000 crore is not much.

There are more than 65-70 lakh SIP and STP transactions every month, with Rs 1,700 crore coming in. In fact, even the average period is longer now, that is, four-five years compared with one-two years earlier. The average SIP amount is Rs 2,000-2,500, which shows that small investors are investing systematically.

Do you think we are likely to see more pain in the market?
The core of any market is the macro and micro environment. The macro environment includes the various deficits, fiscal, revenue or current account, whereas micro is what happens with individual companies.

Currently, we are dealing with headwinds on the macro front, although we don't doubt our ability to deal with it. Corporate earnings have varied from sector to sector. Although our growth model is not shaken by events unfolding outside India, it impacts the cash inflow due to risk aversion. We will always remain vulnerable to international events.

What is your view on interest rates? Have they peaked? What are the best debt options now?
There is fair consensus that we are close to peak interest rates. We will benefit from lower commodity prices, such as of crude oil. However, supply-side constraints, which have caused higher inflation, are not easy to tackle.

Investors have to be careful while buying medium- and long-term debt funds. They should put their money in liquid plus or liquid funds, which have low liquidity and credit risk. They're giving returns of about 8.5%, but may lose tax benefits in the proposed direct taxes code regime.

However, if you do invest in a particular way you could get indexation benefit. Idle money in savings account, earning 3.5%, can be invested in these funds, from which one can potentially earn a 5% higher return with fairly low risk. FMPs are also good options since yields are currently high.

In terms of products, do you see launches of more global funds or silver ETFs?
I don't think there will be lot of funds to invest globally. The industry is trying to raise foreign money coming into Indian markets. We don't know if it will come in the form of new products. I do not back the launch of new products. The most important virtue of a product is simplicity. When we talk about lack of awareness, we cannot launch complex products.

Source: http://businesstoday.intoday.in/story/amfi-chairman-milind-barve-interview-on-future-mutual-fund-industry/1/19533.html

A well-chosen theme-based fund could prove fruitful over the next few years

Following fads blindly is never a good strategy, be it in fashion or investment. However, investors tend to do just this, latching on to the stock or fund that is popular at a given time. Rationality takes a backseat, leaving investors with lemons in their portfolios when the so-called hot items crash. Thematic or sectoral funds are a case in point. As the name suggests, thematic funds are built around an investment theme based on a broader economic trend, be it consumption, financial services, infrastructure, technology or natural resources.

Sectoral funds, on the other hand, invest in companies belonging to a particular industry. These are usually bought when the buzz is at its peak. For instance, infrastructure funds were a rage in 2006-7, when multiyear growth in the Indian economy had everyone gushing about the massive infrastructure opportunity. Today, these are the worst performing funds. Worse, these are not the only funds that have burnt investors' fingers. By the time people get a whiff of a good theme, the opportunity has run its course; there is either very little upside left or the fund is on its way down.

When to invest

The temptation to invest in a particular theme is strong when everybody is talking about it. However, this may not be the ideal time to jump in. Valuations may already have run up as everyone rushes to grab a piece of the pie. For instance, consumptionoriented funds have become popular now. Last year, equity-FMCG funds yielded extremely good returns, far ahead of the negative returns yielded by other equity funds.

This outperformance could easily seduce one to opt for such a fund. But these have already had their time under the sun, feel experts. What, then, is a good time to enter thematic funds? One should go by the principle of equity investing, 'buy low and sell high', which applies to equity mutual funds as well.

Swapnil Pawar, CIO, Karvy Private Wealth, asserts, "The investment philosophy for thematic funds is similar to stock investing. Get in when valuations are down and stay invested to benefit from the growth." At times, some sectors or themes are ignored by the market for various reasons.

The stock prices are low either due to problems facing the industry it operates in or as a result of macro-issues plaguing the economy. When most investors exhibit an aversion towards these firms, you must consider investing in them. At such times, solid investments are available at bargain prices.

In most cases, these problems are temporary. Once the cycle turns and the issues are resolved, the firms with strong fundamentals will get back on a highgrowth track. If you buy at the right time, you will benefit from the jump in the stock price, and the rise in the NAVs of the related funds.

Where to invest, where not to

Over the past few months, the stock market has taken a severe beating due to various domestic issues and global concerns. Certain sectors have been sidelined, and as a result, their prices have come down. Investors would do well to identify such areas and take a position at the right time. A well-chosen theme-based fund could prove fruitful over the next few years.

Which are the themes or sectors that investors can target at this uncertain period? Hemant Rustagi, CEO, Wiseinvest Advisors, says, "The valuations appear attractive in many pockets of the equity market. Those who can digest the risk can opt for mutual funds based on these sectors or themes." Here are four sectors which are available at good valuations, but not all make for good investments.

Banking & financial services: This is a good option because it is currently witnessing an investor aversion. High interest rates have cut down its profitability. The non-performing assets (NPAs) are on the rise and net interest margins (NIMs) are being squeezed.

A fall in valuations is not surprising, with several banking stocks now trading at near book values. Experts opine that this pain is behind us and the concerns are already priced in. After the RBI's latest annoucement on bank rate hikes, the uptrend in the interest rate cycle has played out, feel experts. Pawar says a reversal in fortunes is on the cards: "Given the pause in interest rate hike indicated by the central bank, the areas sensitive to rates could make for a sound investment."

Technology: Given the slowdown in developed countries, stock prices of IT services firms had dragged down due to concerns over the sustainability of demand. However, these worries seem to be exaggerated as most IT majors continue to exhibit a decent growth in order books, with no compromise on deal pricing. The companies' revenue estimates for the coming quarters remain reasonably buoyant.

A rebound in outsourcing is expected to start in the coming months. Experts believe that tech-oriented funds could yield high returns for investors in the next few years and that the recent correction provides a good entry point as the downside is limited. "Most of the concerns on demand environment have already been factored into the stock prices of these IT firms," adds Pawar.

Infrastructure: This sector may not make for a good buy since it is facing a host of issues, which has resulted in stock prices taking a beating. Lack of long-term funding, high level of debt on books, poor governance and recent scams have plagued infrastructure firms. Worse, these problems are unlikely to disappear soon, and as such, infrastructure funds are expected to continue to struggle in terms of performance. These funds are also very loosely defined and tend to stray into several areas of the economy. So you will find an infrastructure fund investing not only in construction and engineering companies, but also in cement, telecom and banking.

This is the reason experts are circumspect about the theme. Says Dhirendra Kumar, CEO, Value Research: "It has been a struggle for these funds ever since the bubble was pricked in 2008. I don't see a revival for this sector anytime soon." Investors would do well to stay away from infrastructure funds for the time being, despite the low valuations of most stocks.

FMCG/Pharma: These two sectors have outperformed the market by a long margin over the past year. While the rest of the economy sputtered, companies in this segment have been able to ride out the storm given the non-cyclical nature of business. They have witnessed a steady growth in volumes even though the margins were impacted due to the rise in input costs. Not surprisingly, the stock prices for these companies have gone up.

However, it will be difficult for these sectors to continue outperforming for a long time. Says Kumar: "Such funds will always stand out during bad times. However, they will not exhibit the same level of performance when the economy improves.

In fact, they tend to underperform the market during boom periods." This is the reason they may not make for sound investment at the moment.

Who should opt for sectoral funds?

Such funds are best suited for investors with high risk appetites and those who understand the nuances of the sector or theme. Even if you can digest the risk, these funds should not be a part of your core portfolio. Do not invest more than 10% of your portfolio in these. If you are investing in one, ensure that it adds value to your existing portfolio. Some of your diversified mutual funds may already be exposed to the theme of your choice.

Krishna Sanghvi, head of equities, Kotak Mutual Fund, says, "A concentrated approach will be too risky for some investors. They should not stray from the traditional diversified mutual funds." Hiren Dhakan, associate fund manager, Bonanza Portfolio, says, "Investors need to give five to seven years for these funds to work. Do not redeem your units in a panic when short-term concerns crop up."

Do not fall for marketing gimmicks of fund houses. They will launch funds when there is a buzz around a sector. It doesn't mean you should jump the gun.

Source: http://articles.economictimes.indiatimes.com/2011-11-07/news/30369523_1_thematic-funds-sectoral-funds-equity-mutual-funds/4

Saturday, November 5, 2011

Shiviji K. Vikamsey resigns JM Financial MF

Shiviji K. Vikamsey, an Independent director has resigned from the services of JM Financial Asset Management, with effect from 01 November 2011.

Consequently, all references to Shiviji K. Vikamsey as a director in the Statement of Additional Information/ Statement of Information Document/ Key Information of Memoranda stands deleted.

Source: http://www.adityabirlamoney.com/news/515025/10/22,24/Mutual-Funds-Reports/Shiviji-K-Vikamsey-resigns-JM-Financial-MF-

Friday, November 4, 2011

Are equity systematic investment plans worth it?

Now, the question arises as to how can one safeguard their money from market volatility? The answer lies in Systematic Investment Plans in Equity.

Now-a-days, with the effect of rising inflation, the importance of money is increasing day by day. Money has become the first priority in everyone's life as it is needed in various stages of life at any time. In this expensive world, it is unwise to keep money idle. So, the need is to make money from the money we have which can be achieved by making the right investments. Though the equity market gives good returns, it is highly volatile due to its constant rise and fall. Now, the question arises as to how can one safeguard their money from market volatility? The answer lies in Systematic Investment Plans in Equity.

What are SIPs?

The Systematic Investment Plan (SIP) is a simple plan to increase wealth over a long period of time in a disciplined manner. It allows us to invest in the stock market by way of mutual funds so that you can beat the ups and downs in the market by averaging your cost and diversifying across sectors. Equity SIPs of different amounts and time periods are offered by many brokers like ICICI Direct, HDFC securities, Reliance Securities , Kotak Securities , Geojit BNP Paribas Financial Services , Motilal Oswal Financial Services and IIFL.

Who can deal in the Equity market?

Anyone can enter the equity market and build their own portfolio through DIY-SIP in equities, a product offered by HDFC securities. DIY SIP stands for Do It Yourself Systematic Investment Plan. Another option is the Reliance Securities of the Anil Ambani group introduced RSP (Research Stock Purchase). DIY-SIP allows the customers to enter in the market with small investments. It provides a systematic way to gain direct exposure in the equity markets. ICICI started the new concept of equity SIPs on the lines of mutual funds. It invests a fixed amount every month or invests in a fixed number of stocks daily where one can invest in any blue chip funds or Exchange Traded Fund (ETF).

About Blue Chip Funds

Blue chip value funds provide updates on monthly holdings on or around the 15th of each month .There are several ways to invest in Blue Chip Funds. Shares can directly be acquired by the investors through a broker, a direct stock purchase plan or a dividend investment plan. The best way is to invest in the 'Diamonds'. Diamonds are the investment instrument traded on the American Stock Exchange. As Diamonds have the dual advantage of low expense ratio as well as tax efficiency, they are preferable over blue chips mutual fund. Diamonds are most efficient as they are traded on an exchange.

Investing Do's and Don'ts

When one is investing in the market, they should first analyze the market.

While investing, one should keep some amount aside as a reserve.

People should invest in small sums and must diversify their investments. One should never keep all eggs in a single basket.

Investing in small amount is also helpful as then, in case of a loss, the amount can be recovered easily.

Equity SIP is a method by which customers have the option to invest their funds at a particular fixed frequency of time. It allows systematic investment in a disciplined way.

SIPs generate returns over a long period of time; they do not give results immediately. One has to be patient while investing in SIPs and be prepared to give it some time to fructify.

When the market is high you should buy less number of shares, and when the market is low you should buy more number of shares. Get the benefits compounded over a period of time.

Money should always be in routed form. This means that if you are investing some amount than you should also get some returns on it, in other words, you should assess your Return on Investment or ROI. There should be a money life cycle.

With Equity Systematic Investment Plan, it is a customer's choice to invest at specified frequencies which may be daily, weekly or monthly. You need to vary only the amount of the investment every time you buy the stocks, depending on the stock price in the market. One should invest more when the market is down and should sell it when the market is up so that lesser investment can earn you more returns. Investment can be done in various means like in gold, shares, debt instruments or a combination. The amount to be invested can be transferred through a cheque or online from your account.

Why should one choose Equity Systematic Investment Plans?

It allows you to buy shares, gold etc. at low rate and well spaced out intervals and sell them when the rates are high. There is a lock-in period of SIP's of 3 years after which one can choose to stay invested in the SIP or cash out. One mistake committed by many investors is that they buy shares at high rates and sell them when the market is going down. Equity SIP enables one to avoid this mistake.

Equity SIPs also help one by avoiding the risk of buying shares at high rates. Many a time, it may be possible that for certain period of time, the market is moving down. At this time you should not get panicked and cash out of your investments. You must continue your investment through Equity SIPs and give them some time to bear fruit. Equity Systematic Investment Plans are meant for long term investors. Moreover, the choice of the stock should be made based on the fundamentals of the company.

Equity SIPs are extremely beneficial for those who do not know when to enter and exit the market. With the help of Rupee cost averaging, one tends to invest a fixed sum and not in a fixed number of shares. This practice works more often than not for investors. Also, through Equity SIPs, there is no need to pay extra charges for buying shares. However, one must understand that everything does have a flip side and in this case, the disadvantage is that equity SIPs being market linked instruments, the risk involved is also substantial.

When anyone invests in Equity SIPs, no additional cost is applicable other than the charges of the regular brokerage and the cost for maintaining an account to hold shares in electronic format.

Equity SIP works almost like Mutual Funds (MFs). Broking charges vary depending on the investors; they must understand the market and then invest. Today, some Asset Management Companies (AMCs) or mutual fund houses also provide the ease and convenience of transacting games. They have set up their online transactions platforms, where one can invest in SIPs through IPIN (Internet Personal Identification Number). For a person investing in the market, the necessary condition is that they should be patient. One must understand that they have to stand their ground during market swings. Sometimes, the market may see a major correction. During such situations, an investor should try and buy shares so that the loss in previous investments gets adjusted. When the market rises again, one can sell the shares and book profits. If a person invests in a wrong instrument, he should exit it as soon as possible. With the amount earned, he can buy another product after conducting his research.

Equity SIPs helps one to gradually increase their wealth by investing small amount of money regularly, over a long period of time.

Source: http://www.indiainfoline.com/Markets/News/Are-equity-systematic-investment-plans-worth-it/5280956296