Nivesh ka Funda: STP and SIP should be the best way of investing for investors, says A Balasubramanian

How to prepare for new investments? Which funds should be included in the portfolio and which sector are worth focusing? How to choose good Mutual Funds? Zee Business Managing Editor Anil Singhvi speaks to A Balasubramanian, Managing Director and Chief Executive of Aditya Birla Sun Life Mutual Fund (ABSLMF) to know his advice for new investors and mutual funds.

Managing Director shared his views in a new TV show ‘Nivesh ka Funda', where he said Systematic Investment Plan (STP) and Systematic Transfer Plan (SIP) should be the best way of investing for investors.

Here's an edited version of the exclusive conversation:

Q) New investors are scared because of the Russia-Ukraine issue, so what is your advice to them?
A) Mutual fund investors need not worry much as ups and downs keep coming in the market. In every 2-3 years, something happens that keeps the market sentiments cut, this normally happens. Right now, the market has grown so fast in the post-pandemic, so there was an expectation of its correction, and those corrections are coming in the name of the Ukraine-Russia conflict. But the correction that is coming is not something that makes investors think about their investments. Mutual Funds are long-term investments, if you look from that perspective then there is nothing to worry about.

Q) What advice do you give to those who are going to invest new money?
A) The two concepts have been fairly established in mutual funds - Systematic Investment Plan (SIP) and Systematic Transfer Plan (STP). STP is if you want to put a lump sum of Rs 1 lakh in liquid form or debt form then you can system transfer it in 1 month or 3 months. It is not that you are investing in SIP, then you have to do it perpetually. Therefore, STP and SIP should be the way of investing for investors.

Q) How to select funds for a portfolio?
A) There is a principle for selecting funds for a portfolio and that is 60%-70% of the money should go on to the existing and diversified equity funds such as large-cap funds, flexi-cap funds, multi-cap funds, smaller mid-cap funds. These actually become four portfolios. And the rest 30%-4o% should go with salaried portfolio. salaried portfolio generally focuses on certain segments of the market - digital acknowledge companies, banking finance, consumptions, etc.

Q) Pure equity and debt-equity? Which of the two funds is better?
A) People actually get happy or sometimes get sad too after seeing the market volatility. They invest their whole money by taking risks at such times and then do not get returns. ​So, it is very important to maintain balance between equity and debt because linear growth is never be on one side, the market keeps moving up and down. According to 10-20 years, normally equity market gives returns equal to normal GDP + 2%-3% above, that's it. So, a balance should be needed.

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