Manual Systematic Investment Plan (MSIP): Pros and Cons

A discussion on the pros and cons of a manual systematic investment plan (MSIP), instead of setting of automating it with an ECS bank mandate. I have been practising the MSIP for a few years now and when the topic was broached recently at FB group, Asan Ideas for Wealth, I thought I will list the pros and cons of manual systematic investing.

Thanks to efficient industry driven propaganda, many think of the SIP as the only way to invest in mutual funds. In fact, many believe that SIP is a type of financial instrument without realizing that it is nothing but automated monthly purchase of mutual fund units. Not many people understand that each unit purchased is independent and subject to the same exit load, taxation and lock-in (if any) as per scheme rules.  Thanks again to the propaganda, the SIP is considered as an instrument that forces discipline, which I find quite amusing.

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Comparison: Short-term gilt vs. long-term gilt vs. Ultra short-term mutual funds

Here is a comparison between three types of funds (by choosing one in each category): Short-term gilts funds, Long-term gilt funds and ultra short-term gilt funds. In this post, I would like to reiterate a point made earlier about staying away from gilt funds unless we know how to trade in accordance with interest cycle movements.

Gilts do not have any credit risk. That does not mean they are devoid of risk. The NAV of gilt funds are marked to market. That is, the value of the bonds in the portfolio will equal the current market value. So when interest rates increase, the NAV falls and when rates decrease, the NAV increases. To understand this in detail, please refer to Understanding Interest Rate Risk in Debt Mutual Funds.

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How to choose an SEBI registered investment adviser

Financial services in India are regulated by SEBI. Only those registered as investment advisers with SEBI (SEBI RIAs)  are authorised to provide financial planning advice. SEBI recently warned the public not to engage with anyone who is not a registered investment adviser. If you are looking for financial advice, here is how a SEBI registered investment advisor can be chosen.

The idea behind the investment adviser regulations is to eliminate conflict of interest. Those who distribute products regulated by SEBI (mutual funds, shares, bonds) can only offer “incidental advice” about the product.  They cannot offer investment advice.

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Obsessing over returns is unnecessary for investing!

Investors tend to display extreme behaviour. Most of them want the solace of risk-free returns without understanding the impact of inflation. A few who do understand this impact tend to obsess over ‘how much their portfolio made’. A look at why keeping things simple, with minimal effort and systematic investing,  is all that is required to achieve all our financial goals.

Basant Maheshwari from The Equity Desk, made a brilliant point during a discussion. On 12th March 2006, Australia took on South Africa in a one-day game at the New Wanderers stadium, Johannesburg. Australia made a record score of 434.  SA skipper Graham Smith is supposed to have remarked at the innings break that the Aussies were a few runs short!  How true that turned out to be! South Africa managed to make 438 runs with a ball to spare!

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Caveat Lector: Beware of irresponsible blogging!

A short note on how the lure of online revenue prompts bloggers to generate irresponsible content via sponsored native ads.  There are many ways in which online revenue can be generated. The most popular among them is to install Google Adsense and letting Google spy on your browsing habits and serve up “relevant ads”.  Although I personally dislike this, there is nothing irresponsible about this.

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