Hi Basu ji,
I have read at many portals that SIP is not good for debt mutual fund.
Of all the classes of debt funds, it is only the most volatile ones – the long- and medium-term gilt funds and income funds – where SIPs can make any sense.
What is your opinion on this?
SIP is just the way of investment for your comfort. The risk is there even if you invest using SIP mode or lump sum mode. Who will guarantee that the money you invested through SIP in the volatile product is safe rather than lump sum? Market or product treat your SIP or lump sum in an equal manner.
Hence, understanding to manage your RISK is important.
Typically investors prefer equity mutual funds for SIP investments. This is generally regarded as a great means to build a corpus through averaging investments. Investors also benefit from market volatility and rupee cost averaging as they get more share units during the bear phase and less units during the bull phase. But in case of debt mutual funds, the scenario is not the same.
Debt mutual funds are not as volatile as equity funds which is why most fund managers don’t recommend debt mutual funds. It should be noted that interest rates are crucial to debt investments and investors can earn attractive returns through SIPs in debt mutual funds when interest rates are falling (like they were during demonetization). In such cases, you can opt to invest in dynamic bond fund SIPs which invest in various debt instruments of varying maturities. These funds can also adapt with changing interest rates