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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. 

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:

  1. Axis Mutual Fund
  2. Baroda Pioneer Mutual Fund
  3. Birla Sun Life Mutual Fund
  4. BNP Paribas Mutual Fund
  5. BOI Axa Mutual Fund
  6. Canara Robeco Mutual Fund
  7. CRB Mutual Fund – Suspended
  8. DHFL Pramerica Mutual Fund
  9. DSP Blackrock Mutual Fund
  10. Edelweiss Mutual Fund
  11. ESSEL Mutual Fund
  12. Franklin Templeton Mutual Fund
  13. HDFC Mutual Fund
  14. HSBC Mutual Fund
  15. ICICI Prudential Mutual Fund
  16. IDBI Mutual Fund
  17. IDFC Mutual Fund
  18. IIFCL Mutual Fund (IDF)
  19. IIFL Mutual Fund
  20. IL&FS Mutual Fund (IDF)
  21. Indiabulls Mutual Fund
  22. Invesco Mutual Fund
  23. ITI Mutual Fund
  24. JM Financial Mutual Fund
  25. Kotak Mahindra Mutual Fund
  26. L&T Mutual Fund
  27. LIC Mutual Fund
  28. Mahindra Mutual Fund
  29. Mirae Asset Mutual Fund
  30. Motilal Oswal Mutual Fund
  31. Nippon India Mutual Fund
  32. PPFAS Mutual Fund
  33. Principal Mutual Fund
  34. Quant Mutual Fund
  35. Quantum Mutual Fund
  36. Sahara Mutual Fund
  37. SBI Mutual Fund
  38. Shriram Mutual Fund
  39. SREI Mutual Fund
  40. Sundaram Mutual Fund
  41. TATA Mutual Fund
  42. Taurus Mutual Fund
  43. Trust Mutual Fund
  44. Union Mutual Fund
  45. UTI Mutual Fund
  46. 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)

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