How do I implement VIP?
In today’s time, I have not seen any product in the market which gives us VIP product. Hence we will have to implement it ourselves only. You can take the help of the VIP calculator and manually invest the desired amount according to the Risk variable (Coefficient) chosen by you.
Is there any mutual fund or ULIP product which is offering this presently?
No, there is no fund presently offering this facility.
How to choose and use the Risk variable or Coefficient?
If you are a bullish aggressive investor, then higher coefficient works better for you. Also it would be wise to keep higher risk variable in the initial years of investment.
How increasing or decreasing the risk variable effects my investment?
Risk variable at Zero works exactly like SIP, however we increase the risk variable, installment amount will become higher when the market falls and lower when the market rises. Once the Fund size becomes high then even the slight rise or fall in the market will lead to significant increase or decrease in monthly installment. However if we decrease the risk variable, the increase or decrease in the monthly installment will reduce to large extent.
Markets have risen sharply last month and also I have a huge fund size as on date, but VIP calculator asks me to put negative contribution. What does it mean?
When VIP Calculator shows negative contribution then actually it is an indication to withdraw. This is a very helpful thing as there is no mathematics in investments which gives you an indication when and how much profit should be booked. VIP calculator will indicate this only when there is sharp rise in markets and never when the market falls.
Does selecting higher risk variable means I am taking high risk and will get higher return?
Not necessarily. However if the market grows over a period of 5 years, 10 years or so on then high risk will result in much higher returns.
Can I change risk variable every month?
It depends completely on you.
When we should change the risk variable in order to get maximum from my investment?
When the markets are volatile then Higher risk variable gives much higher return. When market grows consistently then high risk variable will lead to lower investment amount.
I am a very conservative investor what is the risk variable I should choose?
High ris variable works even for conservative investors. However if the fund corpus size becomes very large it is advisable to limit your maximum monthly contribution amount.
I am a very aggresive investor what is the risk variable I should choose?
High risk variable will help you in initial years, however when the fund size become very large it is advisable to limit your withdrawal amount. Yes , you read it correctly “withdrawal” because at high ris variable whenever the market rises significantly, the VIP calculator gives an indication then you should withdraw some amount rather than investing.
Markets have fallen, Should I increase or decrease the risk variable?
Although decision has to be completely yours, it would be wise ti increase your risk variable.
Markets have touched a new high or there is a drastic increase in Nifty last month, what would be the best risk variable for me in both cases?
Even if you don’t change the risk variable, and provided your fund is of large size, VIP Calculator will give you an indication that you should withdraw some amount.
When VIP Works best for me?
When the markets are volatile and increase over a period of 5 years or more then VIP gives much better returns than SIP. Also when the fund size becomes very large, and market increase, VIP calculator will indicate negative Contribution i.e. ask you to withdraw. This is the only calculator which gives you an indication when to book profits when market rises.
What are the disadvantages of VIP
- VIP doesn’t works better when there is consistant increase in the market month on month
- Since no one is offering this product, it has to be tracked manually by you only every month.
- Installment amount changes every month. Provided the fund/corpus size has increase over a period of time, even a slight change in the market will lead to significant change in monthly installments.
