A practical way to buy MF

It has been really quite heartening to see the responses to my last 3 posts where I wrote about how one should buy the different categories of MF schemes now. Many readers have understood by now that automated monthly SIP is not really the way to go ahead and buy MF schemes in our markets. However, they have also raised some issues about the alternative method and I wanted to address those in the current post.

Firstly, people are not clear as to how they should decide on the level of buying. In a falling market the temptation is always to keep waiting to get a better deal. The simplest way to do this is to understand that your goal is not to catch the bottom of the market – this is nearly impossible and doomed to failure. You are just trying to ensure some element of control on the buying price as opposed to a mechanical SIP. You would not buy a stock on a predetermined day of the month, irrespective of the price, so there is really no reason to buy MF the same way. The easiest way to buy will be to keep waiting till the indices make a turnaround for 2-3 days. Once they find support and it is seemingly on the way up you should buy. Again, understand that there is no guarantee that the support will not be a false one but, even then, you have done much better than SIP. A better way to buy will be following the DMA tracking which I have explained in my earlier posts.

Secondly. people have wanted to know what they should do if the markets have a sustained rise for the next 6-7 months. Now, this is quite unlikely for our markets that are linked not only to local news but also to global events. As FII buying determines the health of our markets to a great degree, there will definitely be days where significant downside is there. In the extreme case, if you do not have a buying opportunity in a few months, what have you lost? Remember, there is no need to buy every month or every quarter. You are much better off buying an MF unit at NAV of 15 Rs in January 2017 as opposed to buying it today at 16.5 Rs. Once you understand that markets will never go only upwards, you will be comfortable with the waiting. Your money is only benefiting with the wait.

Thirdly, people are unclear about what they will do with the money in question if they are not putting into SIP every month. Well, you can put it in liquid funds or just have it in your SB account. The important point is that the money should be available to you at short notice. You do not want to miss out on the MF buying opportunity when it arises.

Let me end by giving you a specific example of how this can be done:-

  • Let us say an investor wants to invest 12500 Rs in SSY every month, 7500 in PPF every month and also wants to do SIP of 30000 Rs each month in 3 MF schemes – a mid cap, a small cap and a large cap.
  • In a month where there is no opportunity in SIP buying he will put the money in SSY and PPF additionally. This can go on till 1.5 lacs in SSY and 90000 in PPF is exhausted for the year. Once this happens he can simply put the money in liquid fund if he is not buying MF units.
  • If, on the other hand, there is a great opportunity in MF buying in 2 successive months he will stop his PPF and SSY investment in those months and direct all his money towards buying equity MF.

I hope this is clear now and you will be able to use it well for speeding up your journey towards financial freedom.


13 thoughts on “A practical way to buy MF

  1. Exactly doing same.
    using ppf and fd (flexi) for parking money and investment when market is high.

    your idea is very simple and effective then why experts are not ready to except? Anybody can do that, no need to research more, only less than 1% time required that we are using on Facebook financial group.


  2. Hello sir, your articles are inspirational about investments in MF’s. Can we adopt DMA strategy for sector funds? I could see pharma sector(Nifty Pharma-11250) is down at current levels and 200 DMA is around 11621. Could you please advise if we can buy pharma sector funds(sbi-pharma) now?


  3. Hello Rajshekhar Sir,

    I remember at the start of year, in one of your blog you mentioned we will get many opportunities this year to buy MF around NIFTY 7700 level. I have purchased few units of MF at 7200 level and want to buy more. But NIFTY has already crossed 8400. do you still think NIFTY will come down to 7700 level ?


  4. Sir, NIFTY is at the levels currently which you previously predicted. Whats the next level down it can go to and what levels from when we should start putting money in good MFs?


  5. Hello sir,

    Wonderful article and very practical advice.

    I have a query regarding how to move away from market when one feels it is very high.
    Suppose the market is trading very high and one is not comfortable with the same and would like to protect any gains made so far…how would you suggest one to come out of market – through redeeming units or moving out of Equity fund and instead transferring to debt funds, etc?
    Kindly consider tax implications while suggesting this as frequent redemption may result in short term capital gains.

    Thanks in advance


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