Putting your investments on autopilot

Arvind was at his wit's end trying to be systematic with all his investments. Writing cheques and doing the paper work frequently to manage his mutual funds investments, recurring deposits, insurance and even savings account was quite a hassle for him.

For Arvind and others of his ilk, there are enough avenues, fortunately, to put their investments on ‘autopilot' as it were, with just a minimal set of procedures to be followed.

Welcome to the world of channelling cash flows even while factoring in different market conditions and ensuring apportioning of funds is done to ensure sound returns.

While the SIP is the common investment mode for periodic mutual fund investments, there are also variants such as Flexi-SIP, VIP that take into account market conditions too. Dealing with recurring deposits and savings bank accounts too can be hands-free affairs, what with ‘flexi' options and sweep accounts offering attractive options.

Here we look into these aspects and explain how decision making is active without taking too much of your time with the investing procedure too being fairly simple.

Ease of investment

Once you have made an informed choice on the funds and schemes that you would like to invest in, the toughest part is over!

If you want to start a systematic investment plan (SIP) with a monthly or quarterly instalments, all you need to do is to give an ECS (electronic clearing service) or a direct debit instruction to your bank to deduct a sum regularly on a given day of the month. Even here, your distributor would take your signature on the forms, take it to your bank and have it approved. This is irrespective of whether the distributor is offline such as a Bajaj Capital or an online one such as Fundsindia.com. So your monthly outflows to these funds happen seamlessly without needing your intervention.

But if you want to invest more if have a higher cash inflow during some months say after you receive your bonus or quarterly incentives, you can opt for a Flexi-SIP. So when you fill your application itself, you can specify a regular sum and a maximum sum for a month which is to be deducted. So you can go online and just increase the amount invested during a bountiful month. This can also be a decent strategy during months where markets fall quite a bit and you would like to invest more at lower levels. If your risk appetite is low, and you would like to withdraw a certain amount every month from your funds, you can opt for a systematic withdrawal plan.

Again, you can also take recourse to a systematic transfer plan to move investments from say a debt scheme to an equity scheme and vice-versa during volatile markets and even between equity schemes depending on the risk that you are willing to take.

Newer method

There are also newer methods of investing such as VIP (value averaging investment plan). Here you will invest a minimal nominal amount periodically, say every month. You can specify a maximum amount which can be invested when the markets tank, but there will also be months where there will be no debit from your account due to a heavy surge in markets which can make buying expensive at those levels.

As an illustration, this method allows you to invest Rs 1,000, Rs 10,000 during a big fall in markets, Rs 5,000 in a ‘normal' climbing month and nothing when indices touch their peaks. All this can be preset, so even though your investments are earning smart returns, you don't sweat trying to time the market or track actively.

Not just mutual funds, even your savings bank account can be made to earn higher than normal returns. So if you opt for a ‘sweep' account which most banks offer, any sum in excess of a minimum level is moved to a linked deposit account. This provides both liquidity as you can still withdraw amounts and also higher returns.

Recurring deposits too have come in with different versions offering flexibility to step up or maintain your instalments and all you have to do is to give ECS or standing instructions to move amounts to your RD account.

So you can just sit back and put your equity and debt investments on self-driven mode. The only caveat of course is that you should manage your monthly cash flows optimally and carefully so there are enough funds on the day of the scheduled electronic transfer.

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