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How to choose the best Mutual Funds for SIP?

If you are looking for the best Mutual Funds portfolio for SIP, you have to think of a few factors before investments. The performance of all existing SIP portfolios changes from time to time. Hence you need to do a sincere study of the SIP portfolios of several mutual funds over a course of time to determine the scope of return and risk factor. Many mutual funds offer you a readymade as well as personalized SIP portfolio according to your need. You have to be highly aware of your own financial goal and risk profile before choosing the right scheme.

Determiners for the Best Mutual Funds for SIP

A sound past record: A sound and consistent SIP portfolio over a few years increase the reliability of a mutual fund. Every mutual fund pulls investments from individuals to research a specific financial goal. Track the record of return over an SIP scheme of a mutual fund over the course of the last three-five years and calculate the wealth it can offer you in the longer run. If the financial goal of a mutual fund SIP scheme matches your financial goal, you may consider it for investment.

Risk factor: Only a consistent record of return over the past few years doesn’t calculate the risk profile of a mutual fund. Rather you should determine it through investing the type of funds these mutual funds invest. Through an SIP, you invest in the various schemes of a mutual fund. Mutual funds invest a major portion of your amount in equities. You need to verify the SIP portfolio to determine where is your money going and how is the risk factor. Mutual funds investing money through SIP in large-cap equity funds are less volatile, though this might bring you comparatively low returns. If the mutual funds invest in medium and small-cap funds through the SIP money, this becomes comparatively riskier. However, you get the chance of a maximum return in such schemes. So, it is very essential to determine your own risk appetite before choosing a mutual fund for SIP.

Duration of investment: You should know your own timeline of investments when you are opting for. If you wish a comparatively secured return in short term investments, you should choose the mutual funds whose SIP portfolio mainly consists of debt funds. If you think of long term investments (more than 5 years), invest in equity funds through SIP. Determining your own timeline would help you to choose the right mutual fund for SIP.

Return scheme: Investments in equity funds through SIP for a long time is likely to bring a handsome return for an investor. Equity funds or stock funds are ideal for those who want to get a higher return with their long term investments through SIP. But these types of investments are comparatively volatile. If you are satisfied with a comparatively low but secured return, you can invest in debt funds through the SIP of a mutual fund. Debt funds are owned by government bodies, big corporates, and organizations; and hence it carries lesser risk. In mutual fund investments, risk factors are mostly parallel to the return possibilities. If you have a greater risk appetite, you are entitled to get higher returns. Choose a mutual fund on the basis of their investment portfolio so that you get the desired return through your investment in it.

Amount and frequency: Mutual funds offer you the chance to invest amounts according to your own financial condition. You can invest an amount as low as Rs 500 in a specific interval (weekly, monthly, quarterly) through an SIP in a mutual fund. Determine the surplus amount after all your liabilities and select a plan that goes with your profile and investment goal. Mutual funds provide you flexible schemes of SIP through which you can increase, or decrease the amount of your investment.

A systematic investment plan (SIP) is ideal for new generation investors who are willing to take a smaller risk for a higher return. Choosing the best mutual fund for starting your SIP is necessary because everyone has different dreams and different financial goals. You can invest online in any scheme of a mutual fund according to your investment goal and risk appetite. Hope our guideline will help you to choose the best mutual funds for beginning your SIP. You may consult an AMFI registered mutual fund distributor for proper guidelines before your investment.

How to choose the best SIP plans?

How does an SIP work?

Mutual Fund investment has become accessible to all types of investors due to its flexibility and variety of schemes. Systematic Investment Plan (SIP) is one of the popular investment plans among mutual fund investments. Through the SIP scheme of a mutual fund, an investor invests a fixed amount in fixed intervals. Mutual funds create a common portfolio with an amalgamation of equity, stocks, bonds, securities of different types as per the present market condition. Then it divides the investment value among the investors into different terms as per the financial capabilities of investors. SIP is like the recurring deposits in public and private banks. But the difference is that you count a fixed annual interest rate (generally 5-8%) when you invest in banks’ recurring schemes. In SIP, your return might be much higher than the banks’ recurring scheme as per the market condition. There is a risk factor too in SIP, but the skilled professionals engaged in mutual funds try to get the best return from the market.

When you invest online in SIP of a mutual fund, a fixed amount is deducted from your bank account after a fixed interval. Then you are provided with the units according to the Net Asset Value (NAV) of the mutual fund. NAV is the total asset subtracting the total liabilities of a mutual fund; it is divided among all the investors in that fund. You get additional units after every instalment paid. After a fixed tenure, you can encash your investments. You can also withdraw a portion after the lockin period. Unlike recurring deposits or fixed return plans of insurance companies, mutual fund investments bring you opportunities for more returns with a minimum risk factor. The reason behind this is that it is an almost commission-less investment, and you can manage everything online virtually.

Best SIP Plans

Which are the best SIP plans in the market? This question is a common one among investors nowadays. But the answer is not simple. Determining the best SIP plans depends on the nature of the investment, your financial capability, and your investment goal. A focus on the classification of the SIP will help you to choose the best Systematic Investment Plan (SIP) for you.

Flexi SIP & Top-up SIP: Flexible SIP plan or Flexi SIP offers you the opportunity to invest as per your financial capability from time to time. Unlike most other SIPs, you are not liable to invest a fixed amount, rather you can increase and decrease it. On the other hand, top-up SIP offers you the chance to add an extra amount to the existing amount of your SIP instalment. This helps you to reach your goal faster with the progression of your income.

Perpetual SIP & Trigger SIP: In perpetual SIP, you don’t have to follow a mandatory lock-in period, you can close and withdraw your money anytime. Trigger SIP gives you the option to switch your investment plan according to the market condition.

Advantages of SIP

SIP provides you with the following advantages which are missing in a fixed or recurring deposit in a bank or other financial organizations:

You can invest in top companies with a minimum amount like Rs 500 per month through an SIP.
The return rate of SIP is much higher.
You get the option to increase/decrease the value of your investments in SIP.
You can withdraw your money after a lockin period or anytime based on your plan.
SIP under the ELSS scheme provides you tax benefit U/S 80C.
SIPs are managed by skilled professionals. You have the chance to get the best return.
SIP plans are flexible and customized according to your need, financial condition, and financial goal.
SIPs are offered by mutual funds registered under SEBI.
Your investment in SIP is almost commissionless and paperless. You can invest yourself online.
SIPs grow your wealth and make you a disciplined investor.

If you can invest wisely in SIPs of mutual funds, you can grow your wealth faster. However, mutual fund investments are subject to market risk. You need to go through all the terms and conditions before any investment. You may consult an AMFI registered mutual fund distributor to know more.

How to Choose the Best Fund for SIP?

Systematic Investment Plan (SIP) has opened up a new horizon for enthusiastic investors in India. A systematic investment plan helps an investor to invest a fixed amount in intervals (weekly/monthly/bi-monthly/quarterly/annually). To understand what is the best fund for you for an SIP investment depends on a number of factors. Investors can invest in equities, debts, and liquid funds under traditional mutual fund schemes through an SIP. It reduces the burden of an investor who wishes to invest in the market. Investors can invest an amount as low as Rs 500 per month in a scheme of mutual funds. Almost all the traditional schemes of a mutual fund invest in ELSS funds, debt funds, equity funds, liquid funds, and ultra-short funds directly online through a Systematic Investment Plan.

Everyone’s financial conditions and investment goals are not the same. You can hardly opt for a fund just seeing the short term return factors. If you want to invest in the long run, you have to choose a fund that has proven it less volatile in the longer run. The following are some of the factors that you may consider for determining the best fund for SIP in the present scenario.

Eligibility: How much you can invest after fulfilling all your liabilities is the main thing that you need to determine before selecting a fund for investment. You can invest in the diversified portfolios of mutual funds through SIP. SIP is designed to offer flexible plans for people of all economical classes. Determine the amount that you can invest in regular intervals. Then you select your funds on the basis of your investment goals.

Risk appetite: Risk appetite is an investor’s ability to take risks for his investment. There has always been risk in direct trading as well as mutual fund investments, You need to know how much risk you can bear before choosing a fund. At first, you have to know the risk factors for each and every fund when you are investing through SIP. SIP in debt funds might be less risky as investments in debt funds go directly to the bonds and securities of governments, government bodies, or big corporates. Liquid funds and ultra-short funds are also suitable for those investors whose risk appetite is very low. People having a big risk appetite might consider investing in equity funds.

Investment Horizon: Investment horizon refers to the duration of your investment, the probable validity of your investment portfolio. Long term investors should seek equity funds. Equity funds in a shorter-term might appear volatile, but these give higher returns in the longer run. On the other hand, short term investments in SIP can be made at debt funds, liquid funds, and ultra short term funds for better return and fewer risk factors.

Company profile: Reliability of an Asset Management Company depends on several factors like the track of return in the last few years, CRISIL rank, Assets Under Management (AuM), Net Asset Value (NAV), etc.

Recent Performance: Before making the decisions of investments, you need to track the recent return history of any specific scheme of the mutual fund. Almost all the schemes of mutual funds now offer investment options through SIP. Return in several intervals in a month, year, three years, five years will help you to track the performance, consistency, and volatility of a fund. The fund, which has shown a consistent return, can be chosen because we can assume that the fund is managed by skilled professionals and the fund has a rich portfolio. Check how the NAV per unit developed over the course of time in a fund. Suppose that a fund’s NAV per unit value was Rs 10 five years ago. Now it’s NAV per unit is Rs 15. In the meantime, it had fallen to Rs 8 per unit. So this fund might be considered for the long run as it seems to be less volatile.

Choosing the best fund for SIP is very important because one decision might be a determining factor for the fulfillment of your financial goal. SIP investments in mutual funds are goal based investments and are subject to market risk. You need to read all the terms and conditions carefully before investments. You need to do a proper study before choosing a fund for investments. Expert’s advice and guideline might be beneficial for a consistent return in the longer run. You may contact an AMFI registered mutual fund distributor for expert advice and investment opportunities in a suitable SIP scheme for you. You may check the website of SEBI to know more about the valid mutual funds in Indian market.

Mutual Fund vs Asset Management Company (AMC)

A Mutual Fund company is also known as an Asset Management Company (AMC) that collects funds from so many individual investors to invest in diversified portfolios containing equities, shares, debts, and securities. In Equity PMS, an investor recruits a personal portfolio manager for managing all his investments. This is not possible for the middle class and lower-middle-class investors. An Asset Management creates an opportunity for investing in securities like stocks, bonds, debts for the investors irrespective of financial status. They create a Mutual Fund of a diverse portfolio by investing in large and small-cap equities as well as debts and other securities. The skilled fund manager organizes a common financial investment portfolio on the basis of present market conditions. Then money is pulled from individual investors and it is invested against that portfolio. As Mutual Fund companies do all the things under the supervision of skilled professionals, you possess a high chance of a handsome return. You can be a part of this goal-based investments just through investing online.

An Asset Management Company recruits highly qualified professionals for the perfect allocation of investments. They organize the funds thinking of return prospects and risk factors. An equity-oriented mutual fund gives priority to return and it invests more than 60% of its wealth in equity shares of different companies. A debt oriented mutual fund gives priority to safety, it invests the major portion of wealth in debt securities of government, municipal corporations, and corporates for a systematic return. At first, an AMC creates a portfolio considering the risk and return factors, then it pulls up the funds from the investors and invests in the market. An AMC offers so many schemes for the investors according to the financial goal of an investor. You have to read carefully the details of all the schemes before investing.

Mutual Fund companies need to abide by specific norms of the Reserve Bank of India (RBI), and the Security and Exchange Board of India (SEBI) for running their business. On the basis of their company profile, wealth management scheme, capitals, past records, and other factors, SEBI provides registration to the AMCs for running schemes with Mutual Funds. Before investing online in a Mutual Fund, an investor needs to investigate the profile of the AMC, its past record of return over the past few years, and the flexibility of the schemes. The SEBI registered Mutual Fund Companies* (as of October 20, 2020) are:

Axis Mutual Fund
Baroda Pioneer Mutual Fund
Birla Sun Life Mutual Fund
BNP Paribas Mutual Fund
BOI Axa Mutual Fund
Canara Robeco Mutual Fund
CRB Mutual Fund – Suspended
DHFL Pramerica Mutual Fund
DSP Blackrock Mutual Fund
Edelweiss Mutual Fund
ESSEL Mutual Fund
Franklin Templeton Mutual Fund
HDFC Mutual Fund
HSBC Mutual Fund
ICICI Prudential Mutual Fund
IDBI Mutual Fund
IDFC Mutual Fund
IIFCL Mutual Fund (IDF)
IIFL Mutual Fund
IL&FS Mutual Fund (IDF)
Indiabulls Mutual Fund
Invesco Mutual Fund
ITI Mutual Fund
JM Financial Mutual Fund
Kotak Mahindra Mutual Fund
L&T Mutual Fund
LIC Mutual Fund
Mahindra Mutual Fund
Mirae Asset Mutual Fund
Motilal Oswal Mutual Fund
Nippon India Mutual Fund
PPFAS Mutual Fund
Principal Mutual Fund
Quant Mutual Fund
Quantum Mutual Fund
Sahara Mutual Fund
SBI Mutual Fund
Shriram Mutual Fund
SREI Mutual Fund
Sundaram Mutual Fund
TATA Mutual Fund
Taurus Mutual Fund
Trust Mutual Fund
Union Mutual Fund
UTI Mutual Fund
Yes Mutual Fund

The Association of Mutual Funds in India (AMFI), a non-profit organization promotes mutual funds based financial investments in India. 44 of the SEBI registered Asset Management Companies (AMCs) are its members. Consult with an AMFI registered mutual fund distributor for getting more details about the mutual funds’ schemes and investment guidelines.

*Source: The official website of Securities and Exchange Board of India (SEBI)

Risk Factors and Returns in Equity Mutual Funds

Equity mutual funds invest in different types of shares according to the present market condition. Such mutual fund is famous for high return capability; it invests in the shares of several companies after a sincere study of their market value and past records. Investors need to have a study on the present market condition and the past record of a mutual fund before investing in the equity fund of it to avoid potential losses. All equity mutual funds are not the same; Investors need to have a clear cut idea of a type of equity fund before moving for investment. An equity mutual fund is liable to invest at least 60% of its total wealth in the equity shares of different companies; the rest of the portion it invests in debt funds or in other schemes.

Types of Equity Mutual Funds

Equity Mutual Funds on the basis of Risk Factors

Mutual fund investment is subject to market risk; an equity mutual fund is also no exception. The fund manager of an equity mutual fund organizes the scheme on the basis of risk factors too. As an equity mutual fund invests more than 60% of its assets in equity shares, it bears a comparatively greater risk than a debt security fund. However, the risk factors also depend on the market capitalization of the shares of a company. Equity funds that invest in large-cap funds of the top 100 shares bear fewer risk factors than the equity mutual funds which invest in the mid-small cap funds.

Funds on the basis of Market Capitalization

Equity mutual funds can be categorized on the basis of the market capitalization of the company where it is investing. Some equity mutual funds invest in large-cap funds for a secured return over a period of 2-4 years. This fund comprises blue-chip companies that have the largest amount of market capitalization. On the other hand, medium-small cap funds are comparatively volatile, have greater risk factors, but have better return possibility. These mutual funds invest in the shares of the companies that share a comparatively lesser amount of market capitalization. Some equity mutual funds are Flexi-cap funds, as the fund managers don’t depend on market capitalization value, but the potentiality of the share.

Funds of the Basis of Themes

A number of equity linked mutual funds in the current market invest in the shares of a specific type of company. These are the theme-based equity funds that choose shares from different sectors like pharmaceuticals, real-estates, banking, and finance, etc. The fund manager of such mutual funds chooses the shares of companies on the basis of a common theme. For instance, if the average market of infrastructure is going well now, he might choose the shares of different infrastructure companies from different levels of market capitalization. This type of equity funds are less flexible and bear a comparatively greater risk. However, in terms of return, they have a good record too.

Funds on the basis of Features

Equity mutual funds can be categorized on the basis of features of the investments. Some funds offer the investors the opportunity of investments through a Systematic Investment Plan (SIP). You also get the option of investment in ELSS funds for tax saving U/S 80C of the Indian Income Tax Act.

To Sum up

Equity mutual funds are suitable options for those who want to take mutual funds as goal based investing. Here you have a high scope of earning a good amount with such investments. Otherwise, you get benefits like tax savings under 80C in several equity funds under the ELSS scheme. Before investing in an equity mutual fund, you need to be aware of your criteria like risk factor, tax exemption, the term of investments, etc. You should also study the market over a few years and go through all the terms and conditions before choosing a fund for investment. The best equity mutual fund is that fund which matches your investment capability and financial goal well. Your financial portfolio is diversified when you invest in equity mutual funds. This increases your earning and your credibility as a prospective investor. You can choose and invest online in an equity mutual fund according to your financial goal and risk appetite. Consult an AMFI Registered Mutual Fund distributor to know more.

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