SIP or systematic investment plan is one of the 2 ways of investing in mutual funds. The other way of investing in mutual funds is investing in a payment. Investing in mutual funds via a SIP allows you to stagger your investments over and invest a little sum regularly.
A SIP may be a smart, hassle-free method of investing a hard and fast sum during an open-end fund scheme. It permits one to get units on a specific date monthly to implement a saving plan. One can invest a specific prearranged amount at regular intervals that are chosen beforehand (quarterly, monthly, weekly, etc.). One of the most important advantages of this plan is that it inculcates the habit of saving within the user so that they will start to create a good fund for the future.
Generally, open-end fund investors would invest in 3-5 open-end fund schemes through SIP and redeem as and once they need money. Instead of this, they ought to invest to support the danger appetite, financial goal, and tenure. This way they will maximize the returns from such SIP mutual funds. Like per annum, even this year, we are recommending the highest and best mutual funds to take a position through SIP in 2021. This time instead of the top 10 mutual funds, we would recommend the Top Mutual Funds for 2021. Which are the highest Best SIP to take a position in 2021 in India?
How to choose SIP Mutual Funds?
Here are some tips on choosing Best Mutual Funds to invest in in India.
1) Risk Appetite: Choose a SIP open-end fund that supports your risk appetite (High risk, moderate risk, and low risk). If you''re a low to moderate gambler, no point in investing during a midcap open-end fund, which is supposed for high-risk takers. Investing within the correct SIP open-end fund would always reward you with higher returns.
2) Tenure of investment: Choose a mutual fund based on the tenure you want to invest. This would help you to choose the right mutual fund scheme. If you would like to take a position for 3 months, liquid mutual funds might be better. If you are looking to invest for 10 years, a large-cap mutual fund scheme / Flexi-cap mutual funds could be better options than debt mutual funds.
Who should invest?
Large-cap mutual funds would invest in large-cap/blue-chip stocks and provide stability to your portfolio. If you are a moderate to high-risk investor and willing to invest for 8 to 10 years, you can invest in these best large-cap mutual funds to invest in 2021 through SIP.
Midcap and small-cap mutual funds would tap opportunities in midcap/small-cap stocks. While there are many multibagger midcap stocks and small-cap stocks, these are risky too. If you are a high-risk investor and willing to invest for 10+ years, you can invest in such funds.
How to Choose the Best SIP in India
There can''''t be a ‘best SIP plan’ as SIPs are a mode of investment and not an investment product. Different subcategories under equity: large-cap, mid-cap, small-cap, ELSS, etc. have the SIP option. Sub-categories under debt funds too, liquid funds, ultra-short-term funds, and more have SIP options.
Hence, it''s practically cumbersome to single out the simplest SIP in India. You can apportion your funds smartly once you figure out what proportion you have to invest in equity and debt.
What are the Best SIP Mutual Funds?
Before we proceed to know SIPs, let’s first understand mutual funds. An open-end fund is made when a pooling entity, (fund house or asset management company) pools investments from several individuals and institutional investors with common investment objectives to get securities. Mutual funds are majorly classified into equity funds, debt funds, and balanced/hybrid funds counting on the quantity of their equity exposure.
Investing in mutual funds via a SIP is advisable for first-time mutual fund investors as it helps them in instilling a sense of financial discipline in the long run. The frequency of your SIP is often weekly, monthly, or quarterly, as per your comfort. Most millennials prefer taking the SIP route because it gives them a high degree of flexibility. Investing through SIPs forces you to keep aside a fast sum consistently, which is required to form a habit of investing.
Advantages of Best SIP Mutual Funds
Advantages
Investing in mutual funds via a SIP comes with a host of benefits. The following are a number of the many advantages of investing in mutual funds through a SIP:
i. Rupee cost averaging
Investing in mutual funds provides you with the advantage of rupee cost averaging. Meaning, you purchase lesser units when the markets are booming while you purchase more units when the markets are on the bearish trend. The value of the purchase of your fund units averages out and gets on the lower side. Therefore, you don’t have to time the markets.
ii. You can invest a small sum
As mentioned earlier, investing via a SIP has alleviated the necessity to possess a payment at your disposal to start your investment journey. The standard minimum investment amount is Rs 500. Some funds allow you to take a position even at Rs 100 a month. Therefore, an investable amount isn''t a barrier to urge to start together with your open-end fund investments.
Conclusion
The saying ‘the early bird catches the worm’ holds for a SIP, as you can benefit greatly from starting early. An important aspect of a SIP is that maintaining, is hassle-free; your money will be auto-debited from your checking account monthly and can even be invested into an open-end fund scheme of your choice. When you go for a SIP for your investing needs, there is no need to time the market. There is also a disciplined approach to investments. What’s more, you''ll cash in on two powerful investment strategies: Power of Compounding and Rupee Cost Averaging.