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Information provided on this newsletter has been independently obtained from sources believed to be reliable. However, such information may include inaccuracies, errors or omissions. and its affiliates, information providers or content providers, shall have no liability to you or third parties for the accuracy, completeness, timeliness or correct sequencing of information available on this newsletter, or for any decision made or action taken by you in reliance upon such information, or for the delay or interruption of such information. , its affiliates, information providers and content providers shall have no liability for investment decisions or other actions taken or made by you based on the information provided on this newsletter.
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SIPs from mutual funds have caught on with investors. Here are some operational aspects which investors need to know while investing in a SIP.

1.What is SIP?
A SIP (systematic investment plan) is a specific amount, invested for a continuous period at regular intervals, generally on a monthly basis. It allows the investor to buy units of the scheme he/she decides at a pre-decided frequency and the investor decides the amount and the mutual fund schemes to invest in. It helps investors take part in the stock market, without trying to time it, also bringing discipline to your investments.

2.When Can You Start A SIP?
All open end mutual funds allow investors to route their investments via SIP. You can fill the application form along with the SIP NACH mandate & submit it to the point of acceptance. It generally takes 21-30 days for the banks to register your SIP mandate & start it. Some of the fund houses allow you to choose any day of the month for the SIP, while others have a specific days like 1st, 7th, 10th, etc on which you can run your SIPs.

3.What Should be SIPs tenure?
Most fund houses stipulate a minimum time frame of 6 months for the SIP, or can opt for tenure of 3 years or 5 years. Investors have the choice of opting for the perpetual option, which means the SIP will continue till the investor gives an instruction to the fund house to close it. Financial planners suggest investors link SIPs to their goals & run a SIP for that a long a period. For example, if you are building a corpus for your child’s education which is 15 years away, stay invested for that much time. They suggest you can review it once every six months.

4.Can I increase/reduce my existing SIP amount?
An investor can increase his SIP amount, but that is equivalent to the new transaction and hence he will have to fill in a separate NACH mandate. For example, an investor running Rs.5000 SIP in xyz equity fund can add Rs.2000 to the same scheme by filling up the form. However, if he wants to reduce his SIP amount he has to cancel his existing SIP by filling the SIP stop form & then fill up a fresh application form with SIP mandate for the new SIP amount of his choice. There is no fee/penalty levied by the fund house for starting or stopping any SIP.

5.Can I Add Lump Sum To My SIP?
You can add a lump sum amount to the same scheme in which you are running the SIP. So, if you wish to add Rs.1 lakh to the scheme in which you are running the SIP, you can do so by filling the additional purchase form. The SIP continues to run as it is.
Review and Rebalancing of the portfolio is a matter of great discipline. This is the most important part of financial planning process. One needs to follow certain principles before undertaking this step -

Take advice from an Advisor - It is very difficult for a layman to continuously observe the new changes/events happening around in the market. Thus, one should take service of an experienced advisor and should interact with him, at least every quarter. Advisors take responsibility to follow the development and continuously suggests in case of any change is required.

Tax implications due to change - Sometimes, investors churn their portfolio a lot for the sake of rebalancing. This could cause a heavy tax burden of 30% on profit in case if the holding period is less than one year for Equity or Equity Mutual Funds. One can have tax free income if they stay invested for more than a year.One should check the tax implications of a change in the portfolio before taking any action.

Brokerages - One has to incur brokerage and commissions to do any financial transaction. Transaction cost can be as low as 0.5% in case of shares and up to 3% in case of ULIPs. We should keep a close check if the transaction cost is hindering the benefit of a change of the portfolio. In case transaction cost and tax implication together are more than the benefit of the change ina portfolio, it is better to avoid.

Check Risk profile - Sometimes an investment which looks as an opportunity can bring a lot of extra risk to the portfolio. One should always build the portfolio as per their risk profile.

We all have dreams, be it owning a car, a house, child attending a prestigious college or building a healthy retirement corpus. But we seldom pen down these goals and work towards a plan for achieving them. These can be termed as your life goals. 

Mutual funds have managed to constantly deliver financial planning solutions to investors by way of various products that they offer. Contrary to popular belief, mutual funds are not an asset class. They are vehicles that allow you to execute your financial plan.

In terms of the risk-return perspective, not only can you choose funds which are as safe as you want (such as liquid funds), you can also invest in funds that can be as risky as you want (such as sectoral funds). In between there are various types of funds that have different levels of risk. Not only are they cost efficient, they are tax efficient as well. 

Investment tools such as systematic investment plans (SIPs) and systematic transfer plans (STPs) are ideal for salaried individuals who want to invest consistently and ride through market volatility. By rightly identifying the risk you are willing to take, your liquidity requirement and your return expectation, you can match a fund to suit your investment objective. 

Remember to invest in products you understand, and more important, stick to funds that have an established record. 

While Certified Financial Planners (CFPs) and financial advisors may know these steps, it will be useful for investors to familiarize themselves with the process, so that they can work efficiently and effectively with their financial planners or advisers.

Defining Goals:
This is the first and also, one of the most important steps in financial planning. The more specific and quantitative your goals are the more effective will be your financial plan. Sometimes you may not have enough clarity about all the financial goals in your life, especially if you are young. Sometimes people set impractical goals. An experienced financial planner or adviser can help you define the goals across your savings and investment lifecycle and determine the specific numbers you need to reach specific goals.

Data Collection:
The second step in the financial planning is to collect the data regarding the investor’s income, expenses, assets (both physical and financial like property, gold, bank deposits, stocks, bonds, mutual funds etc), liabilities (like home loan, car loan, personal loan etc), life and health insurance, and other important factors, that will form the inputs in the investor’s financial plans. Many financial planners or advisers prefer face to face meetings with their clients to collect this data. A face to face meeting will also help the investor to clarify doubts, expectations or share additional details with financial planners or advisers.

Data Analysis:
This is the third step of the financial planning process. The financial planner will review all the data collected from the client, e.g. investor’s income, expenses, assets, liabilities, existing insurance policies (both life and non-life insurance), number of family members, legal documents (if required), short term, medium term and long term financial goals.

Through a structured financial analysis process, the financial planner will determine your asset allocation strategy and insurance (both life and health) needs to meet your financial objectives.

Plan Recommendations:
In the fourth step, your financial planner or adviser will make the actual recommendation with respect to your comprehensive financial plan. This will include your asset allocation strategy, alternate investment options (e.g. mutual funds, equity investing, traditional debt products etc.), life and health insurance needs. Your financial planner or adviser will schedule a meeting with you, to discuss these recommendations.

This is a very important step in the financial process for you, as a client. You should make sure that you understand all the recommendations and the reasons thereof. You should ask as many questions as you would like to, regarding each strategy or product, because they will be crucial in meeting your financial objectives.

Implementation / Execution:
In business we say that, a great strategy or plan is completely useless without good implementation or execution. Fortunately, in the personal finance space, the evolution of the financial services industry in India has made implementation of the easiest part of a financial planning process. Implementation involves the actual process of purchasing the investment and insurance products needed for your financial plan. At this stage various regulatory and procedural requirements need to be fulfilled, depending on the products involved.

Monitoring and Tracking:
You should review your financial plan, to evaluate the effect of changes in your income levels, your financial situation, your tax situation, new tax rules, the performance of your investments, and suitability of new products with respect to changes in market conditions. Normally, your financial planner or adviser will schedule meetings with you at a regular frequency, to review your portfolio and discuss if any change needs to be made in your financial plan, asset allocation strategy and product strategy.

Conclusion
We should also remember that financial planning is not a static, but a dynamic exercise. As discussed earlier, your financial situation, goals and aspirations may change over time. Therefore, you should meet with your financial planner or adviser on a regular basis, to ensure that your portfolio is doing well and at the same time, ensure that any change to your financial situation, goals or aspirations is appropriately reflected in your financial plan, and executed upon.
Please mark all your queries / responses to
Information provided on this newsletter has been independently obtained from sources believed to be reliable. However, such information may include inaccuracies, errors or omissions. and its affiliates, information providers or content providers, shall have no liability to you or third parties for the accuracy, completeness, timeliness or correct sequencing of information available on this newsletter, or for any decision made or action taken by you in reliance upon such information, or for the delay or interruption of such information. , its affiliates, information providers and content providers shall have no liability for investment decisions or other actions taken or made by you based on the information provided on this newsletter.