Best mutual fund SIP plans

Want to invest small amounts in mutual funds every month? Then, you could consider an SIP in some of the best mutual funds.

Kavya Balaji   /   March 2, 2021

Systematic Investment Plan (SIP) is an easy way of investing in mutual funds. You can start with as little as Rs. 100 per month. SIPs are hassle-free and straightforward. You can start investing online directly on the mutual fund website or through your broker/adviser. Investors can invest a fixed sum at regular intervals. This could be weekly, monthly, or quarterly.

By investing in mutual funds in a systematic and staggered way, helps instil a sense of financial discipline in the long run. The compounding of returns helps accumulate wealth for financial goals. SIPs come with flexibility as the amount is auto-debited from your bank account. The amount that is debited will be invested in the mutual fund scheme that you have selected.

With every SIP, units of the mutual funds are purchased at the prevailing Net Asset Value (NAV). This gets added to your investment account/folio. With SIP, you get the benefits of rupee cost averaging.

Why SIP is good for you, the investor?

Lump sum and SIP are two ways of investing in mutual funds. While both have advantages and disadvantages, SIP has a number of benefits for retail investors over lump sum. SIPs can be chosen by all investors regardless of their age while lump sum might be beneficial only to those who have a significant amount of money to invest.  For investing in the market, you don’t need to time your SIP.  However, when you invest a lump sum, you cannot invest at market peaks. You need to wait for the market to fall if you want higher returns in the long run.

SIP is investing a fixed sum at regular intervals. So, investors get to buy more units when the markets are low and lesser units are bought when the markets are flying high. This leads to a lower average purchase price that translates to higher returns in the long run. This is rupee cost averaging. With the lump sum investment, you need to invest at a particular cycle. If you invest when the markets have already peaked, the chances of getting more returns will be low. So, the advantage of investing regularly over time makes SIP a better option.

What are the benefits of SIP?

Here are some of the reasons why people invest in mutual funds using SIP.

  • Small amount – You can start with an amount that is as low as Rs. 100 per month. This makes SIP affordable to classes of investors. It reduces the financial risks associated with lump sum investments.
  • Averaging out risks – Mutual funds invest in securities that have a degree of risk. However, when you invest in mutual funds using SIP, the market risks get reduced as the units of the mutual fund scheme are bought periodically. This means that you buy less units when the markets are up. So, an SIP enables you to lower the average cost of your investment and reduces the risks.
  • Power of compounding – A SIP helps build wealth by investing a fixed amount of money regularly over time. So, your investment will start earning returns on the returns generated by the mutual fund if you stay invested.
  • Simple process- Starting an SIP is very simple and can be done online in minutes. To make it easier, you need to give a one-time mandate to your bank for your regular contributions. Once you set up auto-debit, your mutual fund SIP contributions will be automatically deducted from your bank account and invested in the mutual fund scheme. You don’t need to bother about doing this every month.

Top 5 SIP plans in India

Here are some of the best SIP plans in India based on the past performance of the mutual funds.

Fund’s name5-year CAGR return5-year SIP CAGR return
Mirae Asset Emerging Bluechip23.2221.19
Kotak Small Cap19.3920.38
Axis Midcap19.7320.19
DSP Midcap18.4015.79
Sundaram Large & Midcap16.2915.07

*As on 23 Feb 2021

By investing in some of the best SIP plans, you can hope to get higher returns in the long run from your investments. Looking for more mutual funds? Click here to explore the best funds.

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