Should I stop my upcoming SIP investments?

I am 28 years old. I have SIPs of Rs 22,500 in the following schemes:


1. Rs 10,000 in HDFC Taxsaver - Growth


2.Rs 5,000 in Franklin Templeton Taxshield

3.Rs 500 in Tata India Consumer Fund - Regular Growth

4.Rs 1,000 in Emerging Business Fund - Growth

5.Rs 500 in L&T Midcap Fund - Growth

6.Rs 2,000 in SBI Magnum Midcap Fund - Growth

7.Rs 1,000 in Tata Retirement Savings - Moderate Plan Regular Growth

8.Rs 1,500 in Mirae Asset India Equity Fund Regular- Growth

9.Rs 1,000- Reliance Mid & Small Cap Fund- Growth

Looking at the current market scenario do you think I should cancel my upcoming SIPs?

--Arjun Chandra

You have not shared your goals, investment horizon and risk profile. So, we will not be able to comment on your choice of schemes. However, we would like to make a few quick observations.

One, you are investing Rs 15,000 every month in Equity Linked Saving Schemes or tax-saving mutual fund schemes. That means you are investing Rs 1.8 lakh per month in ELSSs in a financial year. You can claim a maximum tax deduction of only Rs 1.5 lakh on investments in ELSSs under Section 80C. That means you are investing more than the required amount.

Two, you are investing in too many schemes, mainly in small and midcap schemes. This is a good strategy only if you have a very high risk tolerance level and a long investment horizon. Small and midcap schemes are extremely risky and volatile. So, they are recommended only to aggressive investors with an investment horizon of at least seven to 10 years.

Three, you are also investing in a sector fund. We do not recommend sector funds to regular investors. It is extremely important to time the entry and exit in sector funds. Only investors with intimate knowledge about a particular sector would be able to do that. Average investors would find it very difficult to pull it off.

It is not a great strategy to base your investment decisions on the prevailing market conditions. In fact, the main reason behind the investing through SIP is to ignore the market conditions and invest regularly in a disciplined manner. A SIP helps to you to earn more mutual fund units during a downturn. This will help you to maximise your returns. Just remind yourself that you are investing through SIPS in equity mutual fund schemes to achieve your long-term financial goals.