Investing money systematically into mutual funds via the Systematic Investment Plan (SIP) route over the long term can help an investor multiply his or her savings manifold.
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Mutual funds allow an investor to diversify their investments as they invest in a basket of stocks and debt, across industries, themes and sectors.
The SIP route allows investors to make small ticket investments and, over time, keep averaging upwards or downwards depending on the direction the broader market is taking. In fact, if one does not have lump sum capital to invest but still wants to beat inflation and partake in growth of the stock market, the SIP route may be the way to go.
Also, no investment is really ever risk free. So, if one wants to hedge risk, investing in the stock market via the mutual fund route through SIPs, is the best way forward for most small investors.
Moreover, SIPs bring a disciplined approach to investing as investors can put their money to work systematically, without being too worried about day to day market movements.
While mutual funds are a tried and tested route that retail investors can take to access the stock markets, it would help an investor if they were to spread their investments across multiple mutual funds in a rational manner.
5 Best Mutual Funds to Invest
What are the Best Mutual Funds for SIP?
So, how does one go about choosing which mutual funds to invest in via the SIP route this year?
One way of doing this is to draw up a list of the best performing mutual funds that are likely to become outperformers in the year ahead.
The best mutual funds for an SIP, are typically the top performers within a category of mutual funds. Also, the best SIP plans tend to have an edge over the others when it comes to investment flexibility, cost and liquidity.
The fact that SIPs have taken off in a big way is proved by the fact that inflows into mutual funds via the SIP route in 2023 were at Rs. 1.83 lakh crore, after December 2023 saw inflows to the tune of Rs. 17610 crore. In 2022, the figure for the whole year stood at Rs. 1.49 lakh crore, indicating a 23% rise on a year on year basis.
How do SIPs work?
The first thing that an investor should ensure before investing via the SIP route is that he or she needs to be KYC compliant. For that the person needs to submit requisite documents like bank account details and ID proofs. Following this, they can freely invest via online portals of asset management companies or other online aggregator platforms.
Once the money is debited from their account, investors are allotted units based on the net asset value of that day.
Top 10 Best Mutual Funds SIP to Invest In India
Best SIP to invest now:
1. HDFC Mid-Cap Opportunities Fund
2. Parag Parikh Flexi Cap Fund
3. ICICI Pru Bluechip Fund
4. HDFC Flexi Cap Fund
5. Nippon India Small Cap Fund
6. HDFC Balanced Advantage Fund
7. ICICI Prudential Equity & Debt Fund
8. ICICI Prudential Corporate Bond Fund
9. ICICI Prudential Short Term Fund
10.LIC MF Gold ETF FoF
The best mutual funds to invest in are those that offer the highest returns on investment although the process of selecting such funds can be subjective and it often depends on other factors. So, the list of the top 10 funds can change if these factors undergo a change.
Overview of Best SIP Plans to Invest in 2024
HDFC Mid-Cap Opportunities Fund is a mid-cap fund that has 93.21% investment in India equities, of which 52.58% is in mid-cap stocks, 5.57% in large cap stocks and 18.09% in small cap stocks. It is most suitable for people looking to stay invested for 3-4 years and high returns, but those that are not risk averse as it is an extremely risky fund.
Parag Parikh Flexi Cap Fund is a flexi cap fund which has a 70.63% investment in domestic equities. Of that, 48.07% is in large caps, 5.8% in midcaps and 7.03% in small cap stocks. It also has a 0.31% investment in debt of which 0.01% in government bonds while the remaining 0.3% is in low risk securities.
ICICI Pru Bluechip is suitable for investors who want to remain invested i equity for the next five years but can take moderate to high risk. It has a 91.39% investment in Indian stocks, of which a majority 81.37% is in large caps, 4.85% in midcaps and the remaining in small caps. 0.47% of the investment is in debt, mostly in government securities.
HDFC Flexi Cap is also a flexicap fund which is 88.67% invested in domestic equities of which 62.54% is in large caps. Only about 6.2% of its holdings are in midcaps and 3.65% in smallcaps. This too is a high risk fund which is good for investors looking for high returns over a five year period.
Nippon India Small Cap is one of the best performing small cap funds in the Indian mutual fund space. It has a 96.42% investment in equities of which 55.41% is in small cap stocks. The fund holds 9.86% shares in midcap stocks and 5.83% in large caps. This is a fund that is extremely risky, given its portfolio, but it also has the possibility of giving very high returns.
HDFC Balanced Advantage Fund is a high performing hybrid mutual fund which has an equity exposure of 68.28%, of which 42.28% is in large cap stocks, 8.27% in small cap stocks and the remaining in midcaps. 28.63% of the fund’s investment is in debt of which a lion’s share is in government securities and 11.79% in low risk securities.
ICICI Prudential Equity & Debt Fund has 71.65% investment in equities of which 53.74% is in large caps, 8.07% in midcaps and a small share in small caps. About 17.92% of the fund is invested in debt, most of which is in government securities.
ICICI Prudential Corporate Bond Fund is a debt oriented fund having 94.29% investment in debt. Of this, 71.85% is in low risk securities and the rest in government bonds. This fund is best for investors looking for stable returns for the long term.
ICICI Prudential Short Term Fund is 88.95% invested in debt, of which 54% is in low risk securities and the remaining in government bonds. This is a good fund for people looking to park their money for up to three years. This is a fine alternative to fixed deposits.
LIC MF Gold ETF FoF has assets under management in excess of Rs. 27400 crore It is a high risk rated gold fund which has generated returns of more than 8.3% over the last one year.
Performance Overview of top 10 best mutual funds to invest now:
| Funds | Category | 1 Yr Returns |
| HDFC Mid-Cap Opp Dir Invest Online | Equity | 49.98% |
| Parag Parikh Flexi Cap Dir Invest Online | Equity | 37.02% |
| ICICI Pru Bluechip Dir Invest Now | Equity | 30.57% |
| HDFC Flexi Cap Dir Invest Online | Equity | 32.64% |
| Nippon Ind Small Cap Dir Invest Online | Equity | 54.93% |
| HDFC Balanced Advtg Dir Invest Online | Hybrid | 35.04% |
| Hybrid | 31.08% | |
| ICICI Pru Corp Bond Dir Invest Now | Debt | 7.88% |
| ICICI Pru ST Dir Invest Now | Debt | 8.15% |
| LIC MF Gold ETF FoF Dir Invest Online | Commodities | 8.36% |
To arrive at a list of the best mutual funds to invest in via the SIP route in 2024, we looked at the performance of mutual funds across four categories- equity, hybrid, debt and commodities- over the last one year.
Factors to Consider Before Investing in the Best Mutual Funds for SIP 2024
The best SIP plans of mutual funds help investors achieve long term goals. SIPs are popular as they help small retail investors make tiny investments that can compound to big amounts over the long term. Investors are also free to choose frequencies of periodicity ranging from daily to monthly to quarterly investments, depending on how much money they can invest.
Investors should consider the following factors before investing via the SIP route.
Identify your needs: The flexibility to invest a small amount helps build wealth over the long term. There is also no upper limit in SIP investments. Starting a SIP with a low amount can be way more convenient on the pocket as against making a lump sum investment.
Maintain An Individual SIP for Every Respective Goal: To determine the overall performance of an SIP, one should link separate SIPs with each milestone. This helps keep a tab on all objectives, and calculate the performance of funds, making it easier to take corrective measures when needed.
Expand Your Investments Based on Your Personal Risk Tolerance: The risk appetite that determines the objectivity of an investment depends on several factors including income, psychological strength and the time horizon in question. Therefore, someone with a long horizon can choose some of the best performing SIP plans and divide the total amount in each of them. This helps diversify the investment portfolio, and brings down market risks. But investors with low-risk appetite or limited job tenure, should only stick to short-term mutual fund investments.
Within A Few Years, Evaluate the Portfolio’s Performance: The tenor of investment is an important consideration. Although there is no standard rule as to how often one should monitor the fund’s performance, the SIP mutual fund portfolio should ideally be reviewed once every three or four years.
Advantages of Investing in Best SIP Plans
Starting an SIP can be rewarding as it gives the investor the choice to invest, track and save more in small ticket sizes and very simply.
Here go some of the advantages of investing in the best SIP plans:
The power of compounding: Compounding generates returns that are oftentimes much higher than one-time lump sum investment. If one has higher disposable income at the end of the month, it is ideal to opt for one of the best SIPs to invest.
Moreover, mutual funds do not charge any penalty, in case it is necessary to stop the SIP at any point. Also, most SIPs allow an investor to skip a month without any charges or fines.
Tax on SIP Investment
All profits gained from investment in mutual funds are subject to tax as ‘capital gains’. But there is a sub-classification based on the fund type and its duration.
If units of equity funds are held for more than 12 months, the gains are treated as Long Term Capital Gain (LTCG) for taxation. If they are held for less than 12 months, the gains are treated as Short-Term Capital Gains. For debt funds, the units must be held for more than 36 months to qualify for LTCG taxation. However, the government removed the LTCG tax benefit for most debt fund categories last year.
Why Invest through SIP?
For most investors it is next to impossible to time markets as they lack adequate knowledge and do not have the time to research and buy individual stocks or bonds. This is where SIPs come in. SIPs can help through rupee cost averaging. It is the concept of averaging out the price at which the units of a mutual fund are purchased.
One of the benefits of investing through SIPs is that they offer the advantage of rupee cost averaging, helping to mitigate market volatility to some extent.
This is achieved by buying more units when the markets are down and fewer when the markets are up. An investor need not personally respond to ups and downs in the market since mutual funds are managed by professional money managers who have the expertise to buy, sell, and monitor investments.
How to invest in Best SIP Plans?
To invest in the best mutual funds for SIP 2024, here is a step-wise guide:
Step 1: To start a SIP, register with a broker or financial advisor or simply sign up with a mutual fund house directly.
Step 2: SIP can be started online. For the online process the investor must create a new account or log in an existing account.
Step 3: After selecting an investment platform, such as 5paisa, an investor can choose from a wide range of investment plans. After narrowing down on the fund, one must click on Invest Now.
Step 4: Select the amount of contribution and time horizon of the SIP tenure. Also, select a date for the SIP.
Step 5: The last step is to submit the form after providing all the necessary information related to the bank account.
Conclusion
Just saving diligently does not necessarily help in wealth creation. It is equally important to invest. Mutual funds offer broader diversification and value-for-money as they help to build on them over time.
Investing in SIPs for long-term gains help accumulate a lump sum amount for the future. With a long time horizon, one can get a higher number of units for the same investment amount when the markets go down.
Having said that, choosing a mutual fund is a personal decision. You need to make sure that you have thoroughly researched the reputation of the fund house, its historic returns, and the risk involved.
