Best SIP Mutual Funds
Systematic Investment Plan (SIP) is the most popular way of investing in mutual funds. Investors can invest a fixed monthly amount to automate their long-term investments in these Best SIP Mutual Funds.
List of Best SIP Mutual Funds to Invest
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What are the Best SIP Mutual Funds?
The best SIP mutual funds have the best SIP returns over the trailing three and five-year periods. Since SIP is a long-term investment approach, it makes sense to select the best SIP funds based on how they have performed over longer periods.
Most of the best SIP mutual funds are from the high-risk equity mutual funds category. They are meant for a long-term investment and can be significantly volatile in the short term. Many popular smallcap, midcap, and flexi-cap mutual funds are part of the list of best SIP mutual funds.
Why Add the Best SIP Mutual Funds to Your Portfolio?
- Ideal for new and young investors who have a long investment horizon
- SIP is a flexible and convenient method to start investing
- Proven track record of historical performance beating the category benchmark returns
Advantages of Investing in the Best SIP Mutual Funds
Disciplined Investment
SIP enables you to automate your investment and hence brings discipline to your investment journey. It allows you to invest a specific amount at regular intervals in mutual funds, unlike paying a lump sum investment at once.
Rupee Cost Averaging
It is a concept where you buy more units when the fund’s NAV is low and fewer units when it is high. Over long investment periods, it averages your purchasing costs. This helps reduce market timing risk in your investments.
Flexibility
You can start a SIP with any amount as per your preference. In addition, you can pause a SIP and resume it according to your requirements.
Compounding
Compounding happens when you earn returns on top of your returns. This is possible when staying invested over long periods. Investing in the Best SIP funds increases the changes of compounding your returns.
Fund Selection
The best SIP mutual funds are selected based on their historical SIP returns. These are the funds where the investor has higher chances of making a great long term SIP investment return and beating the benchmark.
Higher Returns
The best SIP mutual funds have a proven track record of making higher returns than the category average and the market benchmark. Note that past performance may not be indicative of future returns.
Who Should Consider Investing in the Best SIP Mutual Funds?
SIP mutual funds enable investors to build wealth by investing small amounts regularly without straining their financial budget. The following are the categories of investors who can invest in these funds:
New Investors
Although SIP mutual fund investing applies to all investors, it is an ideal option for new mutual fund investors. The new investors usually have long-term investment horizons and high-risk appetites, allowing them to stay invested for an extensive period and earn their expected returns.
Investors with Long Term Investment Horizon
SIPs are an ideal investment tool for investors with a long-term investment horizon, as they offer higher returns over a long duration. In addition, it helps investors achieve their investment goals over the period.
Investors Nearing Retirement Age
Investors nearing retirement age and seeking alternative income sources can opt for the best SIP mutual funds. They can also opt for a Systematic Withdrawal Plan (SWP) to automate the withdrawal process, ensuring a stable income upon retirement.
Points to Consider Before Investing in the Best SIP Mutual Funds
Before investing in the mutual fund investment best plan, you must consider these points to grow your capital:
Investment Goals
You must understand your investment goals before investing in mutual funds, as it will help you choose the best mutual fund according to your goals. You must determine the amount you want to save, your investment horizon and expected returns before you start investing in mutual funds.
Risk Appetite
Assessing risk tolerance is crucial before investing in mutual funds, as different schemes have different risk levels and returns. Hence, choosing the correct mutual funds that align with your risk tolerance is critical.
Investment Horizon
You must consider the investment duration when choosing SIP, as it is devised for a long-term investment horizon. The longer your investment horizon, the higher will be the returns, as the funds get more time to grow.
Expense Ratio
When choosing a mutual fund, you must consider the expense ratio, as the fund manager charges it for maintaining your funds. The lower the expense ratio, the higher will be your take-home returns.
Fund’s Performance
Before choosing the best SIP investment plan for mutual funds, you must assess their past performances. It will help you get better insights into the funds’ historical performance and compare their returns to analyse whether they can withstand market fluctuations.
Fund Selection
There are several types of mutual funds available, like debt funds, equity funds and hybrid funds. Each of these offers different returns and has a different investment approach. Hence, you must choose a mutual fund that aligns with your goals and risk appetite.
Limitations of Investing in the Best SIP Mutual Funds
Investing in the best SIP mutual funds has certain limitations that you must be aware of to appreciate your capital. The following are the limitations of SIP mutual funds:
Market Risk
SIPs are subject to market risks, as the investments’ value may fluctuate depending on the market conditions. If there is a downfall in the market, the investments made using SIPs can decrease, resulting in short-term losses.
Missing Gains
Market timing involves buying and selling units at the best time on the basis of how the market is performing. First-time investors typically do not understand the workings of the market and invest at regular intervals, restricting them from investing in the market’s perfect time.
Limited Control
In the case of a good mutual fund for SIP, the investors have limited control over the pricing and timing of investments. Investors must invest at the pre-determined investment schedule that may not align with market conditions or personal financial situations.
How to Start Investing in the Best SIP Mutual Funds with INDmoney?
In the case of a good mutual fund for SIP, the investors have limited control over the pricing and timing of investments. Investors must invest at the pre-determined investment schedule that may not align with market conditions or personal financial situations.
Step 1
Complete KYC Process
Step 2
Invest in Multi-Asset Mutual Funds
Step 3
Choose SIP or one time investment
Frequently Asked Questions
Is SIP mutual fund a better option than fixed deposits?
Yes, SIP mutual funds are a better option than traditional fixed deposits, as the SIPs offer higher returns in the long term. However, these funds are more volatile in the short term. Hence, investors with long-term investment horizons and risk tolerance must invest in these funds.
Which are the best SIP mutual funds?
The following are some of the best SIP mutual funds:
- Quant Small Cap Fund Growth Option Direct Plan
- Nippon India Small Cap Fund-Direct Plan-Growth Plan
- HSBC Small Cap Fund Fund Direct Growth
- Nippon India Growth Fund-Direct Plan-Growth
- HDFC Small Cap Fund-Direct Growth Option
Are SIP mutual funds taxable?
Yes, SIP mutual funds are taxable. The SIP mutual funds are taxed in the following two categories:
- LTCG: Investing in the funds for a year or more is termed long-term capital gains (LTCG) and is taxed at 10% if your gains are more than Rs. 1,00,000. However, gains up to Rs. 1,00,000 are tax-free.
- STCG: Investing in these funds for less than a year is taxed at 15%
Is SIP mutual funds risk-free?
No, investing in mutual funds using SIPs is not risk-free like other investment options. However, SIPs can mitigate risks by enabling investors to invest small amounts regularly over a long-term duration, averaging the overall investment cost.
What is the return rate of SIP mutual funds?
The SIP mutual funds offer a 5-year return as high as 35.34%. In addition, the 3-year return of these funds is 46.61%.
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