Thursday, June 19, 2014

Smart Systematic Investment Approach In Mutual Funds

1. Stock market is traded on his all time highs and at this time new investor fear to make a new SIP in mutual fund.
2. Many of my friends & co-workers  ask me that " It is safe to make a new SIP in this time? As I always recommended that you must continue make fresh investments in smart stocks or mutual funds in any market condition ( In my book I already describe that how to choose a smart stock for long term or Indian investor may get help from my website ).
3. So in this line I also recommended to make a Smart SIP in any market situation So today I tell my blog readers that how to make a Smart SIP in mutual funds.( Read this article carefully it may change your financial life in long term)
4. For this purpose I Choose " HDFC TOP 200 (G) " as an Example fund to explain you my formula of smart SIP.
5. Suppose you we want to invest 5000 per month in this fund.
6. Ok first month invest whole 5000 in currant NAV .
7. Next month see value of your holding suppose market is up and your portfolio value is 5463 in next month so you are in profit of 463
8. Calculate your profits in percentage term, It is 9.26 %
9. Reduce new month investment amount as per this percentage , so in second month your investment amount is 5000-463 (9.26% of 5000)=4537
10. Next month again see your profit /loss percentage, If you are in loss then increase your investment amount 5000 to 5000+ (net loss percentage of 5000). suppose your portfolio is in 3.5% loss then your fresh investment amount is 5000+ 3.5% of 5000= 5000+175=5175 and If you are in profit then decrease your fresh investment amount 5000 to 5000- (net profit percentage of 5000). suppose your portfolio is in 4.5% profit then your fresh investment amount is 5000- 4.5% of 5000= 5000-225=4775
11. This formula is automatic reduce your SIP amount when market is up and automatic increase your SIP amount when market is down.
12. So this Smart SIP is beaten down any classical SIP where SIP amount is always constant in any market condition.
13. OK at last i tell you reply of one interesting question , when I tell this formula in one investor meeting then a investor ask me what happen if we are in 100 % profit? Will we close this smart SIP after 100 % profit? because as per this formula after 100% profit fresh investment amount is 0.
In reply of this question I tell " please do not forget our formula of profit booking in a mutual fund SIP, Run both formula on your investments and Partially book profits in your SIP when your profit is up to 11 %". 
If you not read my book or my earlier article about mutual fund profit booking then read it here
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