InvestorQ : Is it true that SIPs have to be devoid of emotions and need monitoring? In that case, what is a better choice, equity SIP or equity mutual fund SIP?
Mary Joseph made post

Is it true that SIPs have to be devoid of emotions and need monitoring? In that case, what is a better choice, equity SIP or equity mutual fund SIP?

Answer
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1 year ago


You can argue that in an equity-SIP you need not be influenced by short term factors. But that is easier said than done. When you are handling your own portfolio and you see stock prices being impacted by events beyond your control, your natural tendency will be to panic. This will result in your taking wrong decisions in panic without proper deliberation. For example, if your equity SIP is dominated by banking stocks and if the RBI hikes interest rates, then you portfolio may correct as much as 8-10% in a couple of days. It is hard for any individual investor to stay calm in such situations. However, in a mutual fund the impact will be lower as the portfolio is diversified. Also your fund manager is a professional who can take decisions on which sectors to enter, which sectors to exit and when to sit on cash when there are no opportunities available.

When you get into an equity-SIP, you need to keep a constant tab on the investment environment. There are a plethora of questions that you will have to continuously answer. What will be the impact on your portfolio if the Fed raises rates by 0.25%? How will your stocks get affected since Britain has chosen to exit the EU? What will be the impact of China dumping steel on Indian steel companies? How will your portfolio benefit from the implementation of GST (Goods & Services Tax) Act? Will your stocks benefit from a good monsoon and rural spending? It is practically impossible for Mayank as an IT professional to keep a tab on the implications of all these events that determine the investment environment. An MF SIP will make his life a lot simpler.