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Must Know Options That Can Boost Your Mutual Fund Portfolio

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Must Know Options That Can Boost Your Mutual Fund Portfolio
Himali Patel - 24 June 2019

No matter how much your savings are, mutual funds offer many ways to divert them into meaningful investing either at one go (lump-sum) or periodically (via Systematic Investment Plans - SIPs). Over time as investors seek more value adds towards existing facilities, the mutual fund industry indeed has come about to offer enhancements to such offerings. SIPs have more features now to make an investors financial planning even more convenient under ongoing tough time for mutual fund industry.

Let’s look at some of the options offered;

SIP Pause

For a investor, it is always a worry, when one is not able to invest consistently in mutual funds during their SIP tenure. If the person fails to pay SIP consistently, he/she has to stop the ongoing SIP and re-start it once again, by filling the forms and sending it to mutual fund companies. To avoid such senario, many fund houses are offering a facility called “SIP pause”, wherein investor can pause an SIP for a minimum period of 1 month to a maximum period of 3 months.

That said, the investors aren’t penalised by their banks during duration of the pause and facility can be availed free of cost. Investor has option to choose the number of months that you’d like your SIP to pause at the time of giving your pause application. One can submit your SIP pause application two working days before your SIP date. Note that this facility is availed only once during the tenure of SIP. That said, SIP restarts automatically once the pause period is over. No additional form/documents to be submitted. Presently not all AMCs offer the 'pause' facility and it is recommended to check whether the option is available when opting for the SIP.

SIP booster

With SIP booster one has the facility to choose for SIP amount enhancement at regular intervals – yearly or half yearly while enrolling for the SIP. SIP Booster or Top-up, as it is called, helps an investor increase his/her SIP amount at a pre-determined time interval for example, every year. It is a facility whereby an investor has an option to increase the amount of the SIP installment by a fixed amount at pre-defined intervals. This will boost the flexibility of the investor to invest higher amounts during the tenure of the SIP. SIP Booster Facility shall be available with fresh registration of SIP only.

Fund houses suggest that the top-up amount should be a minimum of Rs 500 and in multiples of Rs 500 only. If an existing investor wants to opt for SIP Booster facility, the existing SIP is required to be cancelled and a fresh SIP investment with SIP Booster Facility is required to be submitted.

Systematic transfer plan (STP)

A lesser used but strategic tool to average out the market is systematic transfer plan (STP). Systematic Transfer Plan is one option an investor can judiciously use to maximize benefits from the market. This is best used when you have a lump sum to invest, such as a yearly bonus. STP ensures that the investment is staggered to average out the cost of investment and one need not be concerned too much with market valuations during the time of investment. Most fund houses and advisors offer STP on their online platform for convenience, but it can also be done offline by simply submitting a one-page application form.

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