Does compounding work in SIPs?

Ans: These are decent funds no need to change, kindly review after 1 year.

Ans: This is a decent portfolio, please continue and review after an year.

Ans: There are options available for top up with AMCs, and it happens automatically without any need to cancel existing schemes and start afresh.

However most of the digital platforms don’t have this option, therefore, if you are comfortable, you may do additional purchases per month in the SIP schemes as lumpsum.

Ans: Understanding Your Investment Strategy
Current Situation
Investment Period: 7 years.
XIRR: 19.5%.
You have achieved an impressive return. It shows your strategy is working well.

Impact of Stopping Current SIPs
Compounding Effect
Existing Investments: Stopping SIPs will not affect the compounding of your existing investments.
Future SIPs: Starting new SIPs with the same amount will continue to grow your portfolio.
Pros and Cons of Starting New SIPs
Benefits
Diversification: Opportunity to diversify your portfolio.
New Opportunities: Invest in funds that may perform better in the future.
Risks
Track Record: New funds might not perform as well as your current ones.
Management Changes: Changing funds means a new fund manager, which may impact performance.
Strategies for Continued Growth
Regular Funds vs Direct Funds
Regular Funds: Managed by certified financial planners, offering expert guidance.
Direct Funds: Requires active management by the investor, which can be risky without expertise.
Actively Managed Funds
Flexibility: Actively managed funds can adapt to market changes.
Professional Management: Fund managers make informed decisions.
Maintaining Compounding Benefits
Consistent Investments
Regular Contributions: Continue investing regularly to benefit from compounding.
Review and Adjust: Periodically review your investments to ensure they align with your goals.
Final Insights
Your current strategy is yielding excellent returns. Here are some key takeaways:

Continue Compounding: Stopping SIPs won't affect existing compounding, but keep investing regularly.
Diversify: Starting new SIPs can offer diversification, but choose funds wisely.
Expert Guidance: Consider consulting a certified financial planner for tailored advice.
Maintaining a disciplined investment approach is key to achieving your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in