Looking for the Best SIP Plans to invest can be a very tall order, especially for the layman, simply because doing so requires a special know-how of the underlying funds, among other aspects of the financial universe. Let’s dive in and discuss the many myths that accompany this asset class and the mistakes investors make when shortlisting SIPs for investment.
The biggest mistake newbie investors make is investing in an SIP based on previous yields. Investors need to understand, an SIP’s previous performance does not ensure consistent upward trajectory moving forward, in terms of the returns fetched.
See, every investor has a different set of liabilities and obligations, making his or her investment agenda unique.
Consequently, an SIP that suits a youngster looking to build a corpus expeditiously by adopting an ambitious compounding strategy, may not be fit for a salaried individual aiming to accumulate wealth for his post retirement needs. The Best SIP Plans are those that are in line with investors’ priorities.
Simply put, SIPs cannot be identified based on generic parameters. Unfortunately, most unsuspecting investors opt for one-size-fits-all plans, which most definitely is a step in the wrong direction and can yield disastrous results.
Choosing SIPs requires detailed scrutiny of aspects that can affect its returns, both in the long and short-term. Those successful in doing so usually end up investing in plans that are best for them, and not for the entity pushing for their purchase.
Investments in SIP mutual funds are made at regular intervals, i.e. weekly, monthly or quarterly. Investors must predetermine an amount they are willing to invest in the SIP, and that amount will be auto-debited from their account on the specified date upon their standing instruction. After that, the investor will be assigned a corresponding number of mutual fund units, determined by the current Net Asset Value (NAV) of the plan.
Learning how to select the Best SIP Plans starts with identifying and acknowledging shortcomings in investors’ capabilities. Individual investors, more often than not, find themselves at the wrong end of the market because of lack of knowledge and active involvement.
Reliance on half-cooked research and previous growth trajectories proves detrimental in such cases. As already established, the scope of the research needed for identifying suitable SIP schemes goes beyond the capabilities of the average investor.
The truth is that there is no readymade solution for selecting SIP plans. Each investor's needs are unique, so solutions must be tailored to match individual needs. This is where BFC Capital comes in.
Now, let’s move on and learn, How to Select the Best SIP Plans ?
Ideally, investors should start by getting their priorities in order. They should have clear understanding about their purpose for investing in an SIP, be it for buying a house, or just building much-needed wealth. All such relevant information must be discussed with the professional helping them identify appropriate SIP Plans, including their risk appetite, the tenure of investment they are targeting and the targeted corpus, among other things, so a scheme can be shortlisted accordingly.
SIP Mutual Funds allow investors the freedom to start wealth accumulation with as little as Rs.100 a month, and consequently, do not strain the investor's budget. Also, they can yield considerable returns if allowed sufficient time to grow. However, there are certain pointers one should look at before investing in this asset class. Keep reading to figure out who should invest in the Best SIP Plans-
Young Investors
Although investing in mutual funds through SIP is advisable for all individuals, it is an ideal investment option for young investors. Young investors have enough time on their hands and have a high-risk appetite that allows them to stay invested for an extended period and taste better returns.
People with Long-Term Goals
SIPs are an ideal wealth accumulating tool for investors with long-term goals because they tend to yield better returns when given enough time to grow. They help investors achieve their investment objectives much faster, be it retirement planning, child marriage planning, etc. That said, people with short-term goals like those planning a trip or saving up for a laptop can also opt for SIP plans.
Those Eyeing a Retirement Plan
Investors looking for an alternate source of income at the time of retirement can always choose SIPs. Investors can automate their withdrawal by opting for an SWP (Systematic Withdrawal Plan) and ensure a steady passive income post retirement. Under SWPs, investors can liquidate a predetermined volume of units from their accumulated corpus at regular intervals and receive the liquidated amount in their bank accounts.
SIPs help investors create long-term wealth, but other than this, there are various other Benefits of Investing in the Best SIP Mutual Funds. Listed below are some such benefits-
Rupee Cost Averaging
One of the inherent features of SIPs is Rupee Cost Averaging. It allows investors to invest a predetermined amount of money at regular intervals irrespective of the market conditions, consequently, helping them purchase additional units in a dipping market, bringing down the average per unit cost in the long run.
Flexibility
SIP mutual funds provide investors with much-needed flexibility. Investors can start, top-up, pause or cancel their SIP investments as they please.
Power of Compounding
Pocket-Friendly Investment
SIP Mutual Funds are pretty pocket friendly and do not burn holes in an investor's pocket. Investors can start an SIP with as little as Rs.100 a month. Such small contributions do not strain the investor's budget and can yield great returns if allowed sufficient time to grow.
The SIP schemes that, in the current environment, can be deemed "best" are listed below. Investors must, however, be reminded that no SIP is universally advantageous or compatible. Each investor has different needs. Consequently, their investment options should be evaluated separately. Please contact us to discuss SIP Schemes that will match your needs.
Category | Fund | Ideal Investment Horizon |
---|---|---|
Dividend Yield | Aditya Birla Sun Life Dividend Yield Fund - Growth | 5 Years |
ICICI Prudential Dividend Yield Equity Fund - Reg - Growth | ||
Sundaram Dividend Yield Fund - Growth | ||
Franklin Templeton India Equity Income Fund - Growth | ||
UTI Dividend Yield Fund - Growth | ||
Large Cap | Aditya Birla Sun Life Frontline Equity Fund - Reg - Growth | 6 Years |
DSP Top 100 Equity Fund - Reg - Growth | ||
HDFC Top 100 Fund - Growth | ||
ICICI Prudential Bluechip Fund - Growth | ||
Kotak Bluechip Fund - Reg - Growth | ||
Nippon India Large Cap Fund - Reg - Growth | ||
SBI Bluechip Fund - Growth | ||
Tata Large Cap Fund - Reg - Growth | ||
Large & Mid Cap Fund | ICICI Prudential Large & Mid Cap Fund - Growth | 7 Years |
Kotak Equity Opportunities Fund - Reg - Growth | ||
Nippon India Vision Fund - Reg - Growth | ||
Quant Large and Mid Cap Fund - Growth | ||
SBI Large & Midcap Fund - Growth | ||
Tata Large & Mid Cap Fund - Reg - Growth | ||
Flexi/Multi Cap Fund | ICICI Prudential Multicap Fund - Growth | 8 Years |
Nippon India Multi Cap Fund - Reg - Growth | ||
Franklin India Flexi Cap Fund - Growth | ||
HDFC Flexi Cap Fund - Growth | ||
HSBC Flexi Cap Fund - Reg - GrowthAdjusted NAV | ||
Parag Parikh Flexi Cap Fund - Reg - Growth | ||
Mid Cap Fund | ICICI Prudential Multicap Fund - Growth | 9 Years |
Nippon India Multi Cap Fund - Reg - Growth | ||
Franklin India Flexi Cap Fund - Growth | ||
HDFC Flexi Cap Fund - Growth | ||
HSBC Flexi Cap Fund - Reg - GrowthAdjusted NAV | ||
Parag Parikh Flexi Cap Fund - Reg - Growth | ||
Small Cap | DSP Small Cap Fund - Reg - Growth | 10 Years |
Franklin India Smaller Companies Fund - Growth | ||
Sundaram Small Cap Fund - Reg - Growth |
Many investors make the mistake of investing in Mutual Fund schemes based on previous returns. Investors should refrain from investing in table-topper funds, simply because the first-hand research required to identify suitable schemes goes beyond comparing previous returns.
It is worth noting that top mutual funds keep changing on a daily basis, across categories, depending upon market highs and lows. Meaning, the mutual fund presently topping the charts may not make top 10 the very next day or week. Therefore, investing in a scheme just because of its ranking is a flawed approach.
Mutual Funds should only be shortlisted after thorough research, that too by someone who knows what he/she is doing.
Systematic Investment Plans (SIP) do not have any minimum duration.
Recurring Deposits are a good option for those who have a short-term goal, are happy with limited returns and want to avoid any volatility. These are not suitable for long-term goals as returns remain limited. SIPs, on the other hand, are suitable for short & long-term goals both as mutual funds offer a whole universe of schemes suitable for all kinds of tenures.
Yes, KYC is necessary to invest in SIP mutual funds. All investors must be KYC compliant to start investing in mutual funds.
Investors can evaluate mutual fund performance by analyzing previous returns, comparing expense ratios, checking the fund houses' compliance history, etc. For this, investors can also seek help from an authorised Mutual Fund Distributor.
Long-term gains made through SIPs are taxable at 12.5 per cent if the gains breach the Rs. 1,25,000 ceiling. Gains made over the long-term, i.e. after one year, are long-term capital gains. Such gains, if less than Rs. 1,25,000, are tax exempted. Also, short-term capital gains made through SIPs are taxed at a flat 20 per cent, irrespective of the investor's income tax slab.
SIPs are one of the most convenient ways of investing in mutual funds. Investors can start investing in an SIP with a minimum monthly contribution of Rs.100.
Yes, mutual funds are taxable for both long as well as short-term gains. However, gains made after a duration of one year, termed as long-term gains, are exempt up to a limit of Rs. 1 lakh and are taxed at a rate of 10 per cent if the limit exceeds. Also, profits made before one year, termed short-term gains, are taxable at a rate of 15 percent.
Yes, SIP is a good investment option, as it is ideal for compounding wealth over time and is quite pocket-friendly. It is considered one of the best investment options for mid to long-term wealth creation.
One of the inherent features of SIPs is rupee cost averaging. The feature helps individuals to invest a predetermined amount of money at regular intervals irrespective of the market volatility, allowing them to purchase additional units in a dipping market, bringing down the average per unit cost in the long run.