Mutual funds are investment instruments that pool funds from a number of investors and invest the same in different types of securities to generate higher returns. Mutual funds offer you to start your investment journey through a SIP. A Systematic Investment Plan or SIP is a way that enables investors to invest a fixed amount in a fund scheme periodically, i.e; weekly, monthly, or quarterly. The best SIP plans in mutual funds allow investors to enjoy higher returns through long term investment.
SIPs are recommended for first time mutual fund investors. The best SIP to invest in gives investors significant perks.
We have seen how the year 2021 has seen a surge in the number of retail investors in the market. Most of these first time investors are individuals who have limited savings but are aware of the benefits of long term investment. The best SIP to invest in 2022 enables these low capital investors to generate higher returns in the long term using their limited monthly savings. An investor can start a SIP with an amount as low as Rs 100.
You can enjoy the benefits of the Rupee cost average by investing in the top mutual funds for SIP. You can increase your SIP investments when the market is in a downtrend and decrease when the market is booming. This allows you to average the cost of fund units over time.
You can start SIP in almost all mutual fund schemes. You can choose a number of the best funds for SIP and divide your investment amount in each of them as per your investment plan. This allows you to contain market risks and earn steady returns even during downtrends or high market volatility. Keep your SIP investment portfolio diversified by investing equity funds, debt funds, and hybrid funds.
The best SIP investment plan gives you complete control over your investments. You can start a SIP or exit one anytime you wish. You can also pause a SIP and resume it on a later day in the future. No other investment method offers you this level of flexibility.
SIP investments are meant for the long term. The time period of investment matters more than the amount you are investing. Your periodic investments in a SIP keep on compounding over the years to generate substantially higher returns. Hence, it is recommended that you start investing in mutual funds through SIP as early as possible even though you have very tight savings.
Discipline is the most important thing that you need to learn while investing in risk-bearing instruments. SIPs allow you to learn financial discipline that can help you with other investment ventures as well.
The underlying principle for investing in mutual funds SIP is to keep investing a fixed amount periodically for the long term. Recurring investments help you to keep adding a fixed amount to the principal investment. This method of investment offers you to enjoy substantially higher returns through the power of compounding. Let us have a look at how compounding can increase your returns exponentially.
Suppose you choose to invest in one of the best mutual funds for SIP in 2021. You will keep on investing Rs 5,000 per month in the fund for an indefinite period and let’s say that the fund scheme can offer 15% annual returns.
| Number of Years | Invested Amount | Future Value of SIP | Return in % |
|---|---|---|---|
| 1 | Rs 60,000 | Rs 64,301 | 7.1 |
| 3 | Rs 1.8 lakh | Rs 2.26 lakh | 25.5% |
| 5 | Rs 3 lakh | Rs 4.43 lakh | 47.6% |
| 10 | Rs 6 lakh | Rs 13.76 lakh | 129% |
| 20 | Rs 12 lakh | Rs 74.86 lakh | 524% |
As you can see, even though the average annual return of the mutual fund scheme is 15%, the returns offered through the SIP mode of investment can become more than 5 times the principal amount in the course of 20 years.
| Fund | AUM (In Crs) | Expense Ratio | 3 Yr Return (%) | 5 Yr Return (%) | Invest Now |
|---|---|---|---|---|---|
| Canara Robeco Bluechip Equity Fund Direct Plan Growth | 5,208 | 0.36 | 22.30 | 20.79 | |
| Axis Bluechip Fund Direct Plan Growth | 33,519 | 0.46 | 20.52 | 21.78 | |
| Axis Midcap Fund Direct Plan Growth | 16,107 | 0.46 | 26.11 | 24.92 | |
| PGIM India Midcap Opportunities Fund Direct Growth | 3,585 | 0.31 | 36.92 | 25.27 | |
| Kotak Small Cap Direct Growth | 6,509 | 0.48 | 35.41 | 25.08 | |
| Axis Small Cap Fund Direct Growth | 7,695 | 0.37 | 32.96 | 25.14 | |
| Quant Tax Plan Growth Option Direct Plan | 555 | 0.56 | 36.172 | 27.2137 | |
| Mirae Asset Tax Saver Fund -Direct Plan-Growth | 10,087 | 0.43 | 24.49 | 23.82 | |
| Motilal Oswal Nifty 50 Index Fund Direct Growth | 115 | 0.10 | - | - | |
| ICICI Prudential Nifty Index Plan Direct Growth | 2,287 | 0.17 | 17.44 | 17.12 |
| Fund | AUM (In Crs) | Expense Ratio | 3 Yr Return (%) | 5 Yr Return (%) | Invest Now |
|---|---|---|---|---|---|
| Aditya Birla Sun Life Liquid Direct Plan Growth | 30,552 | 0.20 | 4.87 | 5.76 | |
| SBI Liquid Fund Direct Plan Growth | 59,531 | 0.18 | 4.76 | 5.65 | |
| Aditya Birla Sun Life Government Securities Fund Direct Plan Growth | 1,036 | 0.28 | 9.29 | 8.15 | |
| ICICI Prudential Gilt Fund Direct Plan Growth | 3,308 | 0.56 | 9.58 | 7.71 | |
| Axis Banking & PSU Debt Fund Direct Plan Growth | 16,121 | 0.33 | 8.16 | 7.91 | |
| SBI Banking and PSU Fund Direct Plan Growth | 9,442 | 0.34 | 8.04 | 7.79 | |
| Kotak Bond Short Term Plan Direct Growth | 18,545 | 0.34 | 8.52 | 7.79 | |
| Axis Short Term Fund Direct Plan Growth Option | 12,635 | 0.30 | 8.51 | 7.83 | |
| Aditya Birla Sun Life Corporate Bond Fund Direct Plan Growth | 19,774 | 0.30 | 8.65 | 7.92 | |
| HDFC Corporate Bond Fund -Direct Plan - Growth Option | 28,656 | 0.30 | 8.92 | 7.96 |
| Fund | AUM (In Crs) | Expense Ratio | 3 Yr Return (%) | 5 Yr Return (%) | Invest Now |
|---|---|---|---|---|---|
| Aditya Birla Sun Life Liquid Direct Plan Growth | 30,552 | 0.20 | 4.87 | 5.76 | |
| SBI Liquid Fund Direct Plan Growth | 59,531 | 0.18 | 4.76 | 5.65 | |
| Aditya Birla Sun Life Government Securities Fund Direct Plan Growth | 1,036 | 0.28 | 9.29 | 8.15 | |
| ICICI Prudential Gilt Fund Direct Plan Growth | 3,308 | 0.56 | 9.58 | 7.71 | |
| Axis Banking & PSU Debt Fund Direct Plan Growth | 16,121 | 0.33 | 8.16 | 7.91 | |
| SBI Banking and PSU Fund Direct Plan Growth | 9,442 | 0.34 | 8.04 | 7.79 | |
| Kotak Bond Short Term Plan Direct Growth | 18,545 | 0.34 | 8.52 | 7.79 | |
| Axis Short Term Fund Direct Plan Growth Option | 12,635 | 0.30 | 8.51 | 7.83 | |
| Aditya Birla Sun Life Corporate Bond Fund Direct Plan Growth | 19,774 | 0.30 | 8.65 | 7.92 | |
| HDFC Corporate Bond Fund -Direct Plan - Growth Option | 28,656 | 0.30 | 8.92 | 7.96 |
Now, let us take a few SIP plans into the example and see what returns they can offer in a 5-year time period.
| Mutual Fund | Past 5-Year Annual Return of the Fund | Invested Amount | Value of SIP at the End of 5 Years | Return Earned Through SIP |
|---|---|---|---|---|
| ICICI Prudential Technology Direct Plan Growth | 35.2% | Rs 3 lakh | Rs 8.54 lakh | 184% |
| Aditya Birla Sun Life Digital India Fund Direct Growth | 34.3% | Rs 3 lakh | Rs 8.06 lakh | 168% |
| Tata Digital India Fund Direct Growth | 36.2% | Rs 3 lakh | Rs 8.35 lakh | 178% |
| SBI Technology Opportunities Fund Direct Growth | 30.8% | Rs 3 lakh | Rs 7.49 lakh | 149% |
| Quant Infrastructure Fund Direct Growth | 27.9% | Rs 3 lakh | Rs 6.9 lakh | 130% |
The above figures show how much you would have earned only in 5 years from your monthly investment of Rs 5,000 in the best SIP mutual funds for 5 years.
If you are looking for the best SIP to invest now, you can follow these few basic steps:
The top 10 mutual funds for SIP to invest in 2021 have generated substantial returns for investors and will continue to do the same in the coming years. Hence, choose the best SIP plan for 10 years or 20 years to see your money grow over the long term.