Babar Zaidi | May 8, 2017, 03.15 AM IST | Times of India
Though it was thrown open to the public eight years ago, investors started showing interest in the National Pension System (NPS) only two years ago. Almost 80% of the 4.39 lakh voluntary subscribers joined the scheme only in the past two years. Also, 75% of the 5.85 lakh corporate sector investors joined NPS in the past four years. Clearly, these investors have been attracted by the tax benefits offered on the scheme. Four years ago, it was announced that up to 10% of the basic salary put in the NPS would be tax free. The benefit under Section 80CCD(2d) led to a jump in the corporate NPS registrations. The number of subscribers shot up 83%: from 1.43 lakh in 2012-13 to 2.62 lakh in 2013-14.
Two years ago, the government announced an additional tax deduction of `50,000 under Sec 80CCD(1b). The number of voluntary contributors shot up 148% from 86,774 to 2.15 lakh. It turned into a deluge after the 2016 Budget made 40% of the NPS corpus tax free, with the number of subscribers in the unorganised sector more than doubling to 4.39 lakh. This indicates that tax savings, define the flow of investments in India. However, many investors are unable to decide which pension fund they should invest in. The problem is further compounded by the fact that the NPS investments are spread across 2-3 fund classes.
So, we studied the blended returns of four different combinations of the equity, corporate debt and gilt funds. Ultrasafe investors are assumed to have put 60% in gilt funds, 40% in corporate bond funds and nothing in equity funds. A conservative investor would put 20% in stocks, 30% in corporate bonds and 50% in gilts. A balanced allocation would put 33.3% in each class of funds, while an aggressive investor would invest the maximum 50% in the equity fund, 30% in corporate bonds and 20% in gilts.
Ultra safe investors
Bond funds of the NPS have generated over 12% returns in the past one year, but the performance has not been good in recent months. The average G class gilt fund of the NPS has given 0.55% returns in the past six months. The change in the RBI stance on interest rates pushed up bond yields significantly in February, which led to a sharp decline in bond fund NAVs.
Before they hit a speed bump, gilt and corporate bond funds had been on a roll. Rate cuts in 2015-16 were followed by demonetisation, which boosted the returns of gilt and corporate bond funds. Risk-averse investors who stayed away from equity funds and put their corpus in gilt and corporate bond funds have earned rich rewards.
Unsurprisingly, the LIC Pension Fund is the best performing pension fund for this allocation. “Team LIC has rich experience in the bond market and is perhaps the best suited to handle bond funds,” says a financial planner.
The gilt funds of NPS usually invest in long-term bonds and are therefore very sensitive to interest rate changes. Going forward, the returns from gilt and corporate bond funds will be muted compared to the high returns in the past.
In the long term, a 100% debt allocation is unlikely to beat inflation. This is why financial planners advise that at least some portion of the retirement corpus should be deployed in equities. Conservative investors in the NPS, who put 20% in equity funds and the rest in debt funds, have also earned good returns. Though the short-term performance has been pulled down by the debt portion, the medium- and long-term performances are quite attractive.
Here too, LIC Pension Fund is the best performer because 80% of the corpus is in debt. It has generated SIP returns of 10.25% in the past 3 years. NPS funds for government employees also follow a conservative allocation, with a 15% cap on equity exposure.
These funds have also done fairly well, beating the 100% debt-based EPF by almost 200-225 basis points in the past five years. Incidentally, the LIC Pension Fund for Central Government employees is the best performer in that category. Debt-oriented hybrid mutual funds, also known as monthly income plans, have given similar returns.
However, this performance may not be sustained in future. The equity markets could correct and the debt investments might also give muted returns.
Balanced investors who spread their investments equally across all three fund classes have done better than the ultra-safe and conservative investors. The twin rallies in bonds and equities have helped balanced portfolios churn out impressive returns. Though debt funds slipped in the short term, the spectacular performance of equity funds pulled up the overall returns. Reliance Capital Pension Fund is the best performer in the past six months with 4.03% returns, but it is Kotak Pension Fund that has delivered the most impressive numbers over the long term. Its three-year SIP returns are 10.39% while five-year SIP returns are 11.22%. For investors above 40, the balanced allocation closely mirrors the Moderate Lifecycle Fund. This fund puts 50% of the corpus in equities and reduces the equity exposure by 2% every year after the investor turns 35. By the age of 43, the allocation to equities is down to 34%. However, some financial planners argue that since retirement is still 15-16 years away, a 42-43-year olds should not reduce the equity exposure to 34-35%. But it is prudent to start reducing the risk in the portfolio as one grows older.
Aggressive investors, who put the maximum 50% in equity funds and the rest in gilt and corporate bond funds have earned the highest returns, with stock markets touching their all-time highs. Kotak Pension Fund gave 16.3% returns in the past year. The best performing UTI Retirement Solutions has given SIP returns of 11.78% in five years. Though equity exposure has been capped at 50%, young investors can put in up to 75% of the corpus in equities if they opt for the Aggressive Lifecycle Fund. It was introduced late last year, (along with a Conservative Lifecycle Fund that put only 25% in equities), and investors who opted for it earned an average 10.8% in the past 6 months.
But the equity allocation of the Aggressive Lifecycle Fund starts reducing by 4% after the investor turns 35. The reduction slows down to 3% a year after he turns 45. Even so, by the late 40s, his allocation to equities is not very different from the Moderate Lifecycle Fund. Critics say investors should be allowed to invest more in equities if they want.
By Babar Zaidi | ET Bureau | Aug 22, 2016, 01.56 PM IST
Investors saving for goals that are 4-6 years away are advised to go for balanced funds. These funds invest in a mix of equities and debt, giving the investor the best of both worlds. The fund gains from a healthy dose of equities but the debt portion fortifies it against any downturn. They are suitable for a medium-term horizon. Mumbai-based Koyel Ghosh has been investing in a balanced scheme for the past two years for funding her entrepreneurial dream. She will need the money in about 2-3 years from now.
“I want to save enough to be able to start my own business in 2-3 years.”
What she has done
She has been investing in an equity-oriented balanced fund for the past two years. She should redirect future SIPs in a debt-oriented scheme to reduce the risk.
Balanced funds are of two types. Equity-oriented have a larger portion of their corpus (at least 65%) invested in stocks and qualify for the same tax treatment as equity funds. This means any gains are tax-free if the investment is held for more than one year. These schemes are more volatile due to the higher allocation to stocks.
On the other hand, debt-oriented balanced funds are less volatile and suit those with a lower risk appetite. However, the price of this relative safety is that they offer lower returns and the gains are not eligible for tax exemption. If the investment is held for less than three years, the gains will be added to your income and taxed at the normal rate. The tax is lower if the holding period exceeds three years. The gains are then taxed at 20% after indexation benefit, which can significantly reduce the tax.
Balanced funds have done very well in recent months because both the equity and debt markets have rallied in tandem. But this performance might not sustain, so investors should tone down their expectations. Also, investors might note that the one-year returns of debt-oriented balanced funds are more than those from equity-oriented schemes. But this changes when we look at the medium- and long-term returns. The five-year returns of the top five equity-oriented balanced funds are significantly higher than those of debt-oriented balanced schemes. This statistic should be kept in mind if the investor plans to remain invested for 4-6 years.
Beware of dividends
Balanced funds have attracted huge inflows in recent months, but some of this is for the wrong reasons. Some fund houses are pushing balanced schemes that offer a monthly dividend. This might sound attractive because dividends are tax-free, but in reality this is your money coming back to you. Unlike the dividend of a stock, the NAV of the fund reduces to the extent of the dividend paid out.
Also, experts view this as an unhealthy practice and point out that the dividend payout might not be sustainable. “The dividend is not guaranteed, and the fund is under no obligation to continue paying a dividend,” points out Amol Joshi, Founder, PlanRupee Investment Services. “If the market declines, the chances of dividend payout and the quantum of dividend will be lower.”
Even so, several fund houses are using this gimmick to attract investors. In some cases, fund houses have even told distributors to alert clients about future dividend announcements and reel them in. This is also an unhealthy practice aimed at garnering AUM by mutual funds.
What the investor wants
*Moderate risk to capital
*Higher returns than debt
*Flexibility of withdrawal
*Favourable tax treatment
PARVATHA VARDHINI C | August 28, 2016 | The Hindu Business Line
The fund’s debt exposure offers downside protection to conservative investors
Equity-oriented balanced funds are a good choice to beat the current volatility in the markets. These funds invest up to 35 per cent of their corpus in debt instruments and thus provide good downside protection for risk-averse investors. Franklin India Balanced is a fund that fits the bill in this category.
Performance and strategy
In falling and yo-yoing markets, Franklin Balanced remains resilient. In 2011, when the bellwethers and broader markets lost 25-27 per cent, the fund lost only 13 per cent.
In the see-sawing markets of 2015, the fund emerged on top, gaining about 5 per cent, while the indices fell 1-5 per cent.
Franklin Balanced managed to stay on top in the 2014 rally too, by deft asset allocation. The fund did not latch on too much to riskier mid- and small-cap stocks to ride the bull run and allocated less than 15 per cent of its equity portfolio to the same. It, instead, took advantage of the rally in bond prices, by increasing its holdings in government securities in this period. A sharp up-move in both equity and bond markets saw the fund clock 47 per cent return in 2014, as against the 30-37 per cent clocked by the bellwethers and the BSE/Nifty 500 indices.
Its returns are better than of peers’ such as Canara Robeco Balance and Reliance Regular Savings Balanced. The performance even matches that of diversified equity funds such as SBI Magnum Equity.
The fund normally keeps its mid-cap allocations to less than 10 per cent of its equity portfolio, barring occasional spikes up to 15 per cent during market upswings. Its top sectors are typically a combination of cyclicals and defensives. The fund has stepped up its holdings in bank stocks after a breather last year due to multiple headwinds hitting the sector. Barring SBI, its choices lean towards private banks such as HDFC, IndusInd, YES Bank, ICICI and Kotak Mahindra Bank currently.
In the auto sector too, the fund pushed up stake in Mahindra and Mahindra, betting on good monsoon. Other holdings here include Hero MotoCorp, Tata Motors and TVS Motors. Power Grid Corporation, Maruti Suzuki, Mahanagar Gas and Oil India are recent entrants. About 26 per cent is allocated to government securities. In the last couple of months, the fund has been trimming its exposure to corporate bonds. While its exposure to corporate bonds is not significant currently, in the past it has stuck with higher rated bonds — those rated AAA or AA.
Prashant Mahesh, ET Bureau | May 12, 2016, 06.45AM IST | Economic Times
Timing the market or deciding how much to allocate to debt or equity at any point of time is a difficult decision for most investors to make. Investors not willing to invest in a basket of products, could choose balanced funds which automatically rebalances your portfolio .
1. What are balanced funds?
Balanced funds, as the name suggests, are hybrid funds which typically invest in equities and debt instruments. There could be equity oriented as well as debt oriented hybrid plans.
Typically, equity-oriented balanced funds have a 65%-75% exposure to equities with the balanced 25-35% being invested in debt-oriented instruments. Many financial planners suggest firsttime investors into mutual funds begin their journey by investing in balanced funds.
2. What is the advantage of investing in a balanced fund?
Balanced funds offer benefits of asset allocation model in a single structure. The equity component seeks to deliver long-term returns, while the debt component provides stability to the portfolio.
This diversification limits the portfolio from downside risks if either equity or debt enters a bearish phase. When the markets are high, the fund manager has to compulsory sell equity to maintain the maximum level and likewise when the markets are low, the fund manager has to buy equities to maintain the minimum level of equity investment. This is a regular process which a retail investor can’t do because of lack of knowledge and expertise.
3. What taxation benefits do equity oriented balanced fund investors enjoy?
Since balanced funds have an average exposure of 65% to equities, they are taxed as equity funds. These funds enjoy tax-free returns if the holding period is greater than a year; otherwise, they are subject to short-term capital gains tax. Many investors opt for the dividend option in such schemes, as the dividends are tax-free (without any dividend distribution tax) in the hands of the investor.
After the new tax laws where debt funds are taxed as short if held for less than 36 months, the balanced fund is one option where the entire debt holding is tax free if the fund is held for more than one year. If you invest in debt funds of mutual funds, you get advantage of long term capital gains taxation with indexation only after three years.
Written by Adhil Shetty | Published:Sep 18, 2015, 2:59 | Indian Express
The important factor in judging the performance of a mutual fund is the investment horizon. One needs to look at longer periods to assess the performance.
Investment literature is full of ‘how to buy’, ‘how to invest’, and ‘when to buy’ theories. However, very little focus, if at all, is given to the selling part of the investment cycle. After all, you make money only when you sell. This makes selling as important as making the investment, if not more.
There are four major aspects that help one decide when to sell your mutual funds.
Analyse the past returns of the mutual fund.
The performance of a mutual fund is the most important criteria of an investment decision. If the mutual fund does not perform well, it is time to sell. However, one should be realistic about assessing the performance. The most important way to judge a fund on its performance is to compare it with similar types of funds. For example, a midcap equity fund should be compared with other midcap equity funds. A sectoral fund from a fund house should be compared with other similar sector funds. Similarly, a bond fund or balanced fund should be judged against the performance of other bond funds or balanced funds.
The other important factor in judging the performance of a mutual fund is the investment horizon. One needs to look at longer periods to assess the performance. For example, many investors invest based on just the one-year performance of mutual funds. Even fund houses and brokers focus on the previous year’s performance. A fund’s supernormal returns in the previous year might have been supported by macro-economic factors that may not reoccur this year. A fund must be evaluated based on 5-10 years’ CAGR. Longer investment horizon minimises the impact of external factors and presents a better picture.
Study the market levels
When the market is at a high, it is time to liquidate an equity mutual fund. One can find out how sustainable future growth is by looking at the overall Price-to-Earning (PE) ratio of the market. PE ratio is a fairly good indicator of the market’s position.
A PE ratio of 22 or higher is a sign that market may not sustain its upward momentum for much longer.
At the same time, it is very difficult to say when the market will start falling from the high. Hence, instead of waiting for the market to touch its peak and get a few rupees more, one should make an exit. It is impossible to time the market.
Many fund houses offer dynamic funds that work on a similar principle. When the market is high, they reduce the equity holding and increase the bond holding. Similarly when market PE is low, the equity holding increases and bond holding decreases.
Monitor the interest rate before taking a decision on bond funds
Bond funds are funds that invest in fixed income securities such as government bonds, corporate bonds, and bank deposit schemes. Return on bond funds is inversely proportional to the prevailing interest rate. When the rates go down, the bonds prices appreciate and vice versa. Hence, in cases where the interest rates have already bottomed out, one should redeem bond funds and find other investment choices unless one is very risk-averse.
Determine whether the portfolio still supports one’s investment needs
Over time, the portfolio may no more be right for one’s investment needs. This happens when the expectation from investment changes and the current mutual fund does not serve one’s purpose anymore. For example, suppose you had invested heavily in equity funds in your 30s. The investment may have given fabulous returns in your 40s too. However, is it wise to remain heavily invested in equity in your 40s? This is a question you have to answer, especially if you cannot afford to take much risk. Hence, this could be the time to sell a few of your equity mutual funds and divert the proceeds to debt or balanced funds.
Careful and systematic investments in mutual funds can yield high returns. However, one must be canny not just while selecting the right time and type of fund to invest in, but also while choosing the right time to exit the investment to get maximum benefits.
The writer is the founder and CEO of BankBazaar.com
By Sanjeev Sinha | 7 Jul, 2015, 12.38PM IST | ECONOMICTIMES.COM
Markets in 2014-2015 have been rife with fluctuations. The run up to the elections and its aftermath were great for the stock market. There was new optimism about the economy, industry, and business. Oil prices went down and inflation subsided.
A year later, there are prospects of less than normal monsoon, a world economy belabouring its way to marginal growth, and industrial production showing sluggish to incrementally better performance month by month. Markets too have reacted similarly and have gone down by around 6% from their record high hit in March. In such a situation, investors tend to get confused about how and where to invest. In this article, we will look at 6 avenues of investment that can still give you good returns. Here they go:
1. Equity mutual funds (especially comprising blue chip companies)
Though the market has gone down, there is not much downside in blue chip companies and mutual funds comprising of these companies. The government is clear about manufacturing and is providing faster clearances for factories to be set up, production to start, and energy to be given to the industry.
“This may take a few months to operationalize, but the trend is clear. The projects that were in limbo for the last couple of years have started getting approved. This will create significant momentum and wealth for large firms and their investors. Blue chip equity funds are offered by HDFC Mutual Fund, Birla Sun Life, Reliance and many more,” says Adhil Shetty, founder & CEO of BankBazaar.com.
2. Balanced fund (funds made up of equity and debt)
Many investors are not comfortable with pure equity funds because of high risk associated with the fund. Hence, they look for an avenue that is less risky and also takes advantage of market movements partially. Balanced fund is a good choice for such investors.
“Balanced funds invest a part in equity and a part in debt. The equity part moves up and down as per the market and the companies they represent, while the debt part is relatively consistent in returns. The overall return is determined by the weighted average return of equity part and debt part,” informs Shetty.
3. EPF (Employee Provident Fund) and PPF (Public Provident Fund)
EPF and PPF are risk-free investments offering returns of about 9%. There are many advantages of investing in EPF and PPF. They are risk free because they are backed by the Government of India. Moreover, the interest earned is also tax free. You can also save taxes on PPF and EPF investment, subjected to the limit of Rs 1.5 lakh under 80C.
Generally, EPF is done by your employer, and you and your employer both pay equal amount towards your EPF account.
Apart from the post office, PPF account can now be opened in any bank. Walk down to the nearest branch of BoI, Bank of Baroda, ICICI Bank or any other bank to open your PPF account. The maximum amount that can be invested in PPF in a year is Rs 1,50,000. This can be done in a maximum of 12 deposits in a year, and not necessarily each month. The minimum amount required is Rs 500. PPF has a tenure of 15 years, though you can withdraw it before 15 years, subject to certain conditions.
According to financial experts, conservative investors can still bank on EPF for creating their retirement corpus, but for investors with low or moderate risk profile and limited or no other retirement benefits, PPF currently appears to be the best option as returns are to a large extent guaranteed and the withdrawals after the mandatory holding period are tax-free.
4. Bonds offered by the Government and Corporates
Bonds are another avenue that is risk free. The bonds offered by the government are risk free because the government usually doesn’t default on the payment. If everything fails, they can always print new notes and pay the bond holder (at the cost of inflation though).
As far as corporate bonds are concerned, bonds offered by large firms with sound business models are preferable. There is a small risk in corporate bonds in case the company goes bankrupt. However, bonds by Tata, Mahindra, Reliance, L&T etc. are almost risk free.
“The best way to identify a good bond offering is to look at the rating. All the bonds offerings have to go through a mandatory rating by a rating agency. The rating agency decides the rating based on the company’s ability to honour its obligations to bondholders, i.e. whether it can pay the interest and principal on time. A high rating is an indication that the risk is low,” says Shetty.
5. Real Estate
For the last couple of years, the real estate sector has disappointed investors. The market is not showing any discernible trend in this sector. Additionally, the real estate sector is mired in many controversies, corruption, and injurious practices. However, the main contributing reason for the prevailing widespread scepticism was low economic growth and even lower expectation of future growth.
However, with the new government focused on economic growth, the real estate sector will bounce with the first hint of an uptick in growth. Moreover, projects such as smart cities will provide ample opportunities to investors in the real estate sector. But investors should be careful of a few companies which are embroiled in controversies and legal battles with the government and consumers.
6. Foreign or overseas mutual fund
This is another area that investors usually don’t consider due to minimal or zero awareness about foreign companies and markets. However, many mutual fund companies such as DSP Black Rock, Franklin Templeton and others offer mutual funds focused on foreign countries.
These funds invest in many countries based on the nature of the fund. For example, an emerging market fund may invest in China, Indonesia, Vietnam and Brazil, while a fund focused on oil exploration may invest in US shale oil companies, Saudi oil field companies, among others.
A brief overview of returns offered by the above-mentioned entities:
Important points to consider
While investing is important, assessing your investment periodically is vital for your wealth. Even if you don’t check stock prices or mutual fund NAVs every week or every month, it is vital to take a comprehensive look at all your investments every 6 months or a year. During such assessments, it is important to avoid impulsive decisions to sell or buy. The purpose of assessing your investment is to find new avenues of investment and discard an existing one if things have gone bad.
“You also need to know a few key parameters of any asset that you want to invest in. For example, if you are considering a particular mutual fund, look for annualized returns for the last 5 – 10 years instead of just the previous year’s returns. Look for the expense ratio, which is the percentage of investment charged to you. Look for sectors and companies where the mutual fund is investing. All these data is available on any of the numerous financial websites that give out such information,” says the CEO of BankBazaar.com.
Finally, don’t wait for the right time. The most important thing in investing is to start it, no matter how small your investment is. Begin with a small amount and grow the investment, thereby gaining in experience about the markets.
AARATI KRISHNAN | April 26, 2015 | Hindu BusinessLine
It’s a myth that real estate guarantees pots of money. If you’re young, here’s why equity funds may suit you better
There’s an abiding belief among Indians that the only investment that can make you rich is real estate. Such is the allure of getting rich through property that many people in their twenties and thirties want to take on a large home loan and sign up for their first apartment as soon as they receive their first pay cheque.
But if you’re in your twenties or thirties, it makes more sense to invest in equity or balanced mutual funds instead. Not convinced? Here’s why.
EMIs are compulsory savings. Without it, I will just spend the money.
The Equated Monthly Instalment (EMI) on your home loan is not an investment. It is a loan repayment where the lender earns interest off you. Let’s say you have booked a ₹50-lakh apartment and taken a 10-year home loan at 10.5 per cent to fund it. The EMI will amount to ₹67,467. At the end of 10 years, you would have paid a total of ₹80.96 lakh to the bank, of which ₹30.96 lakh will be the interest component alone!
For the apartment to be a truly good investment, it will have to generate a return over and above the ₹80.96 lakh you paid for (not the ₹50 lakh that most people assume). Instead, investing the same money in good equity or balanced funds will earn you a return on your capital, without incurring interest costs.
But I get to create an asset. With equities, after ten years, I may be left with nothing.
If this is your first home and you are actually living in it, it is not an asset at all, because it does not earn you any return. There has been no ten-year period in Indian stock market history when SIPs in equity or balanced funds have delivered nothing.
Between June 1992 and June 2002, which was among the worst ten-year periods for Indian markets, an SIP investment in an equity fund like UTI Mastershare delivered a 13 per cent annualised return. Again between September 1994 and 2004, a flattish period for the markets, SIPs in Franklin India Bluechip earned over 20 per cent CAGR.
That’s not enough. My friends say their property investments have gone up five or six-fold in the last seven years.
Translate that into compounded annual returns, and you will find that the returns aren’t much higher than that earned by good equity funds. To give you an example, Annanagar has been a booming locality in Chennai in the last ten years.
If you bought an apartment there at ₹40 lakh in 2001 (the previous real estate downturn), it is now worth ₹2.4 crore. That’s only a 13.6 per cent CAGR (compound annual growth rate). This is true across markets.
Data from the National Housing Board show that of 26 cities tracked, Chennai delivered maximum appreciation between 2007 and 2014, with the Residex for the city going up 3.55 times.
That’s a CAGR of 19.8 per cent. Markets such as Pune (241 per cent), Mumbai (233 per cent), Bhopal (229 per cent) and Ahmedabad (213 per cent) were other top ones. Their effective returns were 11.4 to 13.3 per cent.
Doing an SIP with a middle-of-the-road equity fund like the Sundaram Growth Fund for the same period would have fetched you a return of over 17 per cent; top performers would have earned you 20 per cent plus.
That’s all-India data. Some localities would have delivered bumper returns.
True, but how would you identify those localities in advance? This is the disadvantage of investing in real estate.
To make sufficient gains, you have to know not just the right state to invest in, but also the right city and locality within it. The same NHB data, for instance, shows that property prices in Hyderabad and Kochi have declined in seven years. Even in a locality, different transactions may yield different prices. To be sure, selecting the right mutual fund to invest in is difficult too. But with funds, you can invest based on the fund’s three-year, five-year or 10-year track record and can be assured that the price you are paying is right.
If you could diversify your property investments across many markets, your results would be better.
But given the large ticket sizes of property investments, most people end up betting much of their monthly pay cheque on just one piece of property. That’s concentration risk.
But I’ve never heard of anyone who became a millionaire by investing in equity funds.
Because mutual fund NAVs are available to you on a daily basis, there’s a temptation to over-trade. Most people who haven’t made money on equity funds are those who haven’t stayed on for ten years or more. They’ve bought funds, sold them and bought them again trying to time markets.
If you did the same with property investments (they have cycles too) you would lose money. Even long-term investors in equity funds invest too little in them.
A 15 or 20 per cent return from equity funds will seem small if only a fraction of your wealth is invested in it. While EMI commitments typically run into ₹30,000-₹70,000 a month, most people don’t venture beyond ₹1,000 or ₹5,000 SIPs.
We’re not recommending that you commit half or three-fourths of your monthly pay to SIPs in equity funds. But if you are in your twenties or thirties, you can certainly afford to commit 20 per cent.
Remember, once you sign up for a home loan, you can’t vary your EMI or stop paying it, if the property doesn’t appreciate or if you quit your job.
With an SIP, you can take a rain check in an emergency.
Source : http://goo.gl/NNgy6P