Want to hike SIP amount? You can do so with top-up at pre-defined intervals

Investors need to choose the option at the time of enrollment

I plan to enrol for a systematic investment plan (SIP). I have heard that some online players offer a top-up facility at the time of signing up. As I would want to invest more than the SIP amount in some months when I have the money, I liked that top-up option. I want to know if fund houses also offer any such option.

Fund houses do offer a SIP top-up facility, which allows investors to increase the SIP by a fixed amount at pre-defined intervals. Investors need to choose the option at the time of enrolment. The top-up details cannot be modified later. 

What’s the difference between the following debt funds: Low duration, ultra-short duration, liquid, money market and overnight. If I am planning to invest for a period of 15 days to three months, which is the best option among these funds?

The duration of the instruments that these funds invest in is the fundamental difference between the categories mentioned above. 

Overnight funds invest in securities maturing in a day, while liquid funds invest in securities with a maturity of up to 91 days. 

Further, the remaining funds can be differentiated based on the duration of the portfolio. For ultra-short-duration funds, the duration is between three months to six months, whereas for low-duration funds it is between six to 12 months. For money market funds, investments are made in instruments having maturity up to one year. You can look at investing in any of the above funds based on your investment horizon. You may consider liquid funds, for example, if you are investing for 15 days. As interest rate cycle stabilises and rates start to come down, longer duration funds are expected to do better. 

What’s the difference between large- and mid-cap and multi-cap funds?

Post Securities and Exchange Board of India's re-categorisation of funds, large- and mid-cap funds and multi-cap funds are defined as two separate categories. While large- and mid-cap funds are mandated to invest a minimum of 35 per cent each in large-cap and mid-cap stocks, multi-cap funds have no restriction on investment in a specific market-cap band. They can invest across market capitalisation with minimum equity exposure of 65 per cent.

Why is it that most equity funds have fared worse than Sensex for the past one year?

So far in 2018, there has been a sharp divergence in performance across the market capitalisation curve. The S&P BSE Small-Cap index, for example, is down 28 per cent when compared to S&P BSE Sensex. Only two-three stocks have contributed substantially to the index returns. The market movement has been concentrated. Equity mutual fund portfolios are diversified, and the impact of this concentrated rally in only a few stocks has led to the funds underperforming the broader market in the short term. These anomalies, however, will not sustain in the long term and mostly, funds tend to outperform their benchmark indices in the long run. 

I had given Aadhaar for KYC (know your customer). With the new Supreme Court ruling on Aadhaar, will the mutual fund house let me continue or make my folio dormant until I furnish alternative documents?

Yes, your current investment will continue to remain active, and you can transact in your existing folio. In case of any further notice from the regulator, investors will be informed about the additional requirement, if any.

I am a US citizen now. When I was an Indian citizen, I had mutual fund investments. I had not yet complied with the Foreign Account Tax Compliance Act (FATCA) norms. I want to know what happens to my investments.

Your prior investments will not be impacted because of change in citizenship or residential status. The investments 

will keep growing in line with the market. However, you will not be able to initiate any further transactions in the fund until 

you adhere to FATCA compliance.  The writer is MD & CEO, SBI Mutual Fund. The views expressed are the expert’s own. Send your queries to yourmoney@bsmail.in