YOUR QUERIES: MUTUAL FUNDS: Continue SIP for 7-10 years to buy units cheap and get good returns

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I am planning to stop my SIP investment as the returns are poor. Please advise.
—Arjun Shah

SIP enables an investor to average out the cost of his investments via disciplined purchases, particularly when the market is down. If markets rally, the NAV increases and the investor gets fewer units for each subsequent SIP instalment. The reverse happens when the market corrects. When you accumulate units in a correction phase, you get more units while prices are down. Hence, you should continue your SIP if you are investing for the long term (more than seven to ten years) as you would benefit from buying units cheap. You should evaluate the performance of the fund vis-à-vis that of its respective category peers. If a fund has been performing poorly on a consistent basis, you may switch to a better performing one.

I want to invest in gold exchange traded funds. How can I track the returns?
—Gopal Mishra

The NAV of gold ETFs as disclosed by mutual funds is based on the prices of the underlying assets and the number of units in the ETF. Gold ETFs do not have any lock-in period and can be sold on the exchange or directly to the mutual fund. Since the minimum amount for a direct transaction with the mutual fund is high; for retail investors it is best to sell their units on the secondary market platform.

I want to nominate my son to continue investing in my mutual fund schemes after my death. What is the process?
—Alok Singh

A nominee cannot invest in the investor’s account, post the investor’s demise. A nominee can claim the units by completing the necessary formalities; such as completion of the KYC process, proof of death of the unit holder, signature of the nominee duly attested, and such other documents as may be required for transmitting the units in favour of the nominee. After the transfer of the units, your son can hold the investments under his name and may invest further. In case no nomination is made, the units would be transmitted to the account of the legal heir(s), basis whether the deceased person has left behind a Will and as per applicable succession law.

The writer is director, Investment Advisory, Morningstar Investment Adviser (India). Send your queries to

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