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.
