I am starting my first systematic investment plan (SIP) from next month. What is an ideal lock-in period for a particular SIP? Should I make the instalments for more than 15 years or start a new SIP instead?

—Sravan Kitni

SIPs do not come with a lock-in period per se. The funds that you choose for your SIP may have an exit load (of about 1%) if you make an early withdrawal from the investment (usually within about a year of an investment instalment). Outside of that, open-ended mutual funds do not carry a lock-in period. The only exception to this is tax-saving mutual funds (equity-linked saving schemes) which are locked for a period of three years starting from the date of investment.

If, on the other hand, you are enquiring about the period for which you should be running your SIP in a particular fund, that is entirely up to you and the period for which you are planning to invest. If your investment time period is 15 years, you can start your SIP in one or more funds right now, and get that portfolio reviewed every year to make sure that the funds are still good to invest in. So, the portfolio would need to be looked at and examined on a yearly basis than wait for the entire SIP duration to complete before taking the call.

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For example, if you are choosing to invest in Funds A and B, at the end of 12 months, you should examine if A and B are still good. If not, replace the one that is going in the wrong direction with a better fund and keep investing. If the funds are good, you can continue them. This is the approach to take for SIP investing rather than feel “locked-in" to a particular fund for the entire course of your investment tenure.

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Srikanth Meenakshi is co-founder and chief operating officer, FundsIndia.com. Queries and views at mintmoney@livemint.com

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