Want to start an SIP? Get expert advice here

Below is the edited transcript of the interview with CNBC-TV18's Latha Venkatesh and Reema Tendulkar.

Q: We have so far heard that the advantages of investing via the systematic investment plan (SIP). Is there any flip side to investing via SIPs? When should one consider an SIP?

A: I think people are disillusioned with SIPs because of the way they have been marketed. They have been marketed as a panacea for all investment evils, but that is not the case.

An SIP is simply a way of channelising your money in a disciplined way and keeping emotions out of the investment process. For instance, today the market is up by around 2%. A person using his or her discretion may stay away from today’s market feeling that it has gone up a lot. But if you have an SIP programme running, your money will anyway be deployed today. So that is an auto pilot mode of investing. But it is not a way of guaranteeing against losses. People have been marketing it as that. That is why investors are disillusioned.

Also, SIP is not limited to mutual funds. Even a simple recurring deposit is a form of an SIP. So, I would suggest that people just go in for it, just as a disciplined way of investing and not as an elixir, which will solve all your investment evils or guarantee against losses.

Q: Why do you not recommend SIPs in individual stocks?

A: Because individual stocks can go to zero. But a mutual fund is a collection of stocks simply. It is very unlikely that the NAV of a fund can go to zero. We have seen several real estate and other infrastructure stocks can go to zero.

Q: Can you recommend good schemes for SIP, gold funds?

A: Market will always remain volatile. So, an SIP is a good way of participating in a market without spending time on researching individual stocks yourself. So, I guess you should go in for it.

If you have not invested in funds earlier, I suggest you to begin with a couple of good largecap equity funds like HDFC Sensex Plus, Franklin Blue-chips, or DSP Top 100. There are a slew of good funds but you have to choose properly.

Also, I would not like to comment on whether gold is a good investment at this current point in time simply because I do not want to speculate on prices. But sure a small strategic allocation to gold is always recommended.

Q: If he wants to invest only Rs 3,000 per month, should he put it in one fund itself because you have recommended about two-three funds or should he diversify even Rs 3,000 per month?

A: I think Rs 3,000 is not a very big amount. The one fund could do the trick. I would suggest an index fund plus is a good option.