Find Out Whether New SIP Investment is Better than Old SIP Investment

It’s no big secret that a Systematic Investment Plan popularly referred to as SIP is a safe and secure mode for wealth creation. It is a facility provided by mutual funds to build a big corpus through a disciplined approach over the long haul. However, investors, sometimes find themselves in a tight spot when evaluating their mutual fund portfolio, especially if the schemes are losing value.Should they swap old plans with new ones that keep popping up? Is it a wise move? Will the younger funds be able to put up strong returns and outperform their seasoned counterparts?A dilemma indeed!While there are the tried and tested SIPs that have been around for years, on the other hand, there are up-and-coming new schemes that promise superior performance. So what is the correct move? Let’s find out. But first, it’s important to learn a little about the time-bound systematic investment channel.

The SIP investment plan is a smart financial strategy offered by mutual funds for accumulating wealth over a period of time. It requires one to invest a specific sum of money at predetermined intervals (daily, weekly, monthly, or quarterly) in a disciplined manner. SIPs offer a whole bevvy of benefits. Thanks to rupee-cost averaging, they can counter market fluctuations, curb the need to track the market constantly, and also hedge the investment against inflation.The procedure of investment is simple. The SIP can be started with a paltry sum of ₹500 per month. What’s more,the amount gets deducted monthly from your bank account automatically. And yes, you can monitor your investment through the periodic statement of accounts.Another plus of SIPs is the magic of compounding. A small amount invested regularly grows exponentially with compounded returns over the years. The key to achieving financial goals and enjoy the magnifying effects of compounding is to start investing early and go for the long-term.Example:An investment of ₹5,000 every month in an equity mutual fund via SIP at an assumed annual return of 12% will yield 25 lakhs in 15 years.

Coming to question whether younger SIPs have the potential to outdo those that have been around for a decade or more? Well, new entrants do have a slight edge over their older peers. For starters, they enter the market landscape with an effective plan of execution and unique features to put up strong returns. Newer funds also have a competitive advantage over their already established counterparts.Armed with innovative strategies and latest techniques, they are better equipped to beat the market benchmark. Furthermore, they have onboard a team of highly educated, forward-thinking professionals with a proficiency in the financial domain to fuel growth and run the show impeccably. But whether the newbies have staying power is something only time can tell.In contrast, the existing SIP schemes do not boast a differentiation qualityor novel tactics of investment. However, they are cost-competitive, have a good brand name, and an impressive track record of consistent performance. On the management front, old investments are run by experienced fund managers that have client-centric focus and work well under pressure. They take risks and don’t shirk from making big decisions or adapting their modus operandi to the evolving marketplace for success.

So what is the verdict? Is the new SIP investment better than the old one? There’s no clear answer to this query. The truth is what works for one investor may not for another. When it comes to picking a scheme that is right for you, don’t let it boil down to just old VS new. While the age of the SIP is important there are other things to consider such as strategy, performance, costs, etc.Also, the scheme must be in sync with your financial objective. But most importantly, there is a need to evaluate the entire portfolio from time-to-time and take corrective action like weeding out schemes that have lost their sheen and replacing them with lucrative new ones.Happy Systematic Investing!

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.