image title
ULIP INSURANCE

Looking to invest in Mutual Funds via SIP? Here are 10 things to know

Karan Sharma Karan Sharma 03 June 2019

Is SIP the best method of investing in a mutual fund? Read ahead to know more.

image title

A Systematic Investment Plan in a mutual fund is your ultimate best friend when it comes to savings. Well, a systematic investment plan in a mutual fund is more commonly known as SIP. You must have definitely come across this term at some point in life. In this article, we will help you understand more about investing in a mutual fund via systematic investment plan.

Under a SIP, you are required to make deposits of small amounts on a regular basis. The money invested via SIP is utilised to purchase units of your chosen mutual fund. These mutual funds are managed by expert finance professionals who intend to improve the returns of the fund via strategic investment planning. SIP is one of the most popular methods of investing in mutual funds as it offers multiple benefits to the investor.

SIP in mutual funds are so popular that as per the Association of Mutual Funds in India, Mutual Fund SIPs accounts stood at 2.62 CRORE! And the total amount collected through SIP during March 2019 was ₹8,055 crore. This means that currently, Indian Mutual Funds have about 2.62 crore (26.2 million) SIP accounts through which investors regularly invest in Indian Mutual Fund schemes. To help you understand better, we have created a list of 10 points. These are ten things to know before investing in mutual funds via SIP.

  1. Amount of Investment - SIPs allow you to invest as per your requirement. With a SIP, you can begin subscription to a mutual fund with an amount as low as ₹100 or ₹500 per month. A smaller investment per month lessens the financial burden on your wallet in comparison to making a lump sum investment.

  2. Savings Plan - An SIP can be made on a monthly, quarterly, semi-annual and annual basis. Such an investment plan indicates the habits of savings among investors.

  3. Recurring Investment - Just like a recurring deposit, you are required to make regular deposits. The main difference lies in the fact that RD returns are linked to banks FD rates. Mutual funds invest in multiple financial instruments (debt, equity or hybrid), and hence their performance is linked to market-related returns.

  4. SIP mutual funds are of many types; a hybrid mutual fund is a type of mutual fund, under which the investment portfolio is equally divided between equity and debt instruments. Such category of mutual funds come with moderate risk.

  5. Market Timing - Market timing refers to the ideal time frame where an investor can gain the maximum benefit out of the stock market. That is purchasing more units of a mutual fund when the market is down and the prices are low. With SIP, you are investing throughout the year, even during market fluctuations. Therefore, investment via SIP in mutual funds averages out the purchase price, thereby giving better returns.

  6. Regular investment makes you a disciplined investor. You become more aware of your expenses and start curtailing the same for maximum investment.

  7. Rupee Cost Averaging - Rupee Cost Averaging reduces your overall cost of investment. You buy units, irrespective of market volatility.

  8. Investment via SIP in mutual funds can be suited as per your risk appetite.

  9. Investment via SIP in mutual funds is ideal for people who do not have the finances to make a single lump sum investment.

Best Mutual Fund SIP portfolios to invest in 2019

Note: All information has been sourced from the official website of the mutual fund companies.

Axis Bluechip Fund - G

Investment Objective: The investment objective of this fund is to achieve long term capital appreciation by investing in a diversified portfolio predominantly consisting of equity and equity related securities of Large Cap companies including derivatives.

TypeEquity: Large Cap
Fund ManagerShreyash Devalkar
RiskModerately High
BenchmarkNIFTY 50 Total Return
AUM (Crore)₹4,802
Return Rate 1 Yr (%)8.37
Return Rate 3 Yr (%)14.34
Return Rate 5 Yr (%)13.72%

ICICI Prudential Regular Savings - G

Investment Objective: The investment objective of this fund is to generate regular income through investments predominantly in debt and money market instruments. The Scheme also seeks to generate long term capital appreciation from the portion of equity investments under the Scheme.

TypeConservative Hybrid
Fund ManagerEquity : Rajat Chandak Debt : Manish Banthia
RiskModerately High
BenchmarkNIFTY 50 Hybrid Composite Debt 15:85
AUM (Crore)₹1,622
Return Rate 1 Yr (%)6.85
Return Rate 3 Yr (%)10.01
Return Rate 5 Yr (%)11.21

Motilal Oswal Multicap 35 Fund - G

Investment Objective: The investment objective of this fund is to achieve long term capital appreciation by primarily investing in a maximum of 35 equity & equity related instruments across sectors and market capitalization levels.

TypeEquity: Multi Cap
Fund ManagerMr. Gautam Sinha Roy
RiskModerately High
BenchmarkNIFTY 500 TRI
AUM (Crore)₹13,520
Return Rate 1 Yr (%)-5.96
Return Rate 3 Yr (%)14.25
Return Rate 5 Yr (%)NA

UTI Regular Savings Fund - G

Investment Objective: The investment objective of this fund is to invest predominantly in debt and money market instruments and part of the portfolio into equity/equity related securities with a view to generating income and aim for capital appreciation.

TypeConservative Hybrid
Fund ManagerAmandeep Chopra Ajay Tyagi
RiskModerately High
BenchmarkCRISIL Short Term Debt Hybrid 75+25 Fund
AUM (Crore)₹2,562
Return Rate 1 Yr (%)4.33
Return Rate 3 Yr (%)8.22
Return Rate 5 Yr (%)9.89

SBI Magnum Multicap - G

Investment Objective: The investment objective of this fund is to provide investors with opportunities for long-term growth in capital along with the liquidity of an open ended scheme through an active management of investments in a diversified basket of equity stocks spanning the entire market capitalization spectrum and in debt and money market instruments.

TypeEquity: Multi Cap
Fund ManagerMr. Anup Upadhyay
RiskModerately High
BenchmarkS & P BSE 500 TRI
AUM (Crore)₹7,095
Return Rate 1 Yr (%)0.66
Return Rate 3 Yr (%)13.08
Return Rate 5 Yr (%)17.68

Bottom line

If you are new to investing in mutual funds, it is sure-shot option to go via Systematic Investment Planning. Investing in mutual funds via SIP will lessen the financial burden on a beginner. Also, it will help you understand how to effectively build your mutual fund portfolio.

Karan Sharma
Written by Karan Sharma
Content Specialist and Strategist, foolishly creative and always ready for a game of 'Call of Duty'.