Dollar SIP is exchange rate sensitive, riskier

While it can help save for dollar expenditure, the same can also be done through any other international fund

This facility allows investors to invest a fixed amount of dollar on a specified date at fixed intervals. That is, the amount you want to invest in dollars will be converted to rupee on the basis of the Reserve Bank of India’s (RBI) reference rate and that amount will be deducted from your account. Lumpsum investment facility is not allowed as of now.

The facility is for those who have any dollar expenditure in the future. Such people can hedge their dollars with this facility depending on the exchange rate each month.



“For conversion of dollars to rupee, the RBI reference rate prevailing on the seventh day prior to the transaction day (T) shall be used. For instance, if a dollar SIP of $100 is to be executed on the 21st of a month, the reference rate for T-7th day or 14th of the month will be used for conversion. The resultant amount thus calculated will be debited from the investor’s bank account on the 21st,” says the product FAQ sheet. PineBridge also has also specified the SIP dates of 1st, 7th, 14th or 21st of each month or quarter.  

The minimum investment amount is $100. While the amount in dollar terms shall remain constant all through the investment tenure, the exchange rate and / or rupee movement shall determine the amount that you will invest each month.



This product is essentially like a value SIP where an investor simply chooses an equity scheme, a maximum and minimum investment amount they want to invest every month. Just like SIP, a debit mandate will be used to make the monthly deductions. And the investments made will range between the minimum and the maximum amount set by the investor, explains a fund manager who does not want to be quoted.

Similarly the Dollar SIP can help you save more or less depending on the rupee movement. Thus, ensuring you save the target amount. Such products do make sense for those who have a dollar expenditure coming up in future like child going abroad for higher studies or a foreign holiday and do on, he further adds.



But to be able to do that you should have sufficient investment horizon, of at least five years, because it is a high risk product, warn financial planners. You also need to be careful because this product invests in US equities and the US has almost recovered from the slump thus offering little upside. Europe is beginning to come out of the slump and so has potential to offer higher returns in comparison.



The investor can mention the maximum authorised debit (MAD) amount per SIP instalment in the application form to keep a tab on the amount that can be debited from investor's account. Till the time SIP amount converted from dollar to rupees exceeds the MAD, the SIP amount will not processed and will start automatically as and when the instalment amount falls below MAD.

But saving for such expenditure need not necessarily happen in dollar terms. You can do the same in rupee terms with any other international fund. If you think the rupee will depreciate you can invest more right from the start and save a higher amount. Also the dollar-rupee conversion may confuse retail investors, says the fund manager.

Additionally, this product does not promise returns better than any other fund. The tax treatment to investments in this will also be treated as debt investments. Launched in December 2013, this fund has returned 2.34% in the last three months, slightly below the category average of 2.57%. Its one-month returns stand at 0.39% below the category average of 1.70%.