Best SIP Plans - Top Funds to Invest via SIP

A Systematic Investment Plan (SIP) is an alternative to the traditional lump sum mode of investment. Under a SIP, a certain amount is deposited in a mutual fund scheme at periodic intervals. A SIP helps an investor to benefit from the power of compounding while keeping the periodic investment requirement light on the pocket as a SIP can be started with an amount as low as Rs. 500. 

Here are the top 10 mutual fund schemes suitable for SIP investment :

*3 year returns are annualised. Data based on the NAV of direct-growth variant of schemes as on May 12, 2020

Also Read: Best Mutual Fund investments

Benefits of Investing in SIP

You can start your investments in the best sip plans with a small amount of Rs.500 only. Not just this, but SIPs are known as a less risky way of investing in Mutual Funds. Here are some benefits of investing via SIP:

• Small amount: SIPs allow investors to invest with amounts as low as Rs. 500 at regular intervals. This helps them to invest without any financial burden as well as reduces the financial risk associated with lump sum investments

• Less Risk: Mutual funds invest in market-linked instruments (equities and debt) and thus they carry a degree of risk with them. However, under the SIP mode of investment this market risk gets reduced as units of a mutual fund scheme are bought periodically. At periodic intervals when markets are up the invested SIP amount buys fewer units of a fund and vice versa. Thus, a SIP enables you to lower the average cost of your investment and reduce the risk of your investment by spreading the purchase price over time. This is known as rupee cost averaging
• Power of compounding: A SIP enables you to regularly increase your investment amount by a fixed amount and get the benefit of compounding as you earn returns on the returns generated by your investment. This is known as power of compounding

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• Automated Process: One of the best features of a SIP is that it can be made automatic. For this, an investor needs to give a one-time mandate to his/her bank after which the SIP contributions will be automatically deducted from his/her bank account and invested in the mutual fund scheme automatically at the selected periodic intervals. This saves one from the trouble of filling forms and cheques or logging on digital platforms for every SIP contribution

Be mindful of the following mistakes while making a SIP mutual fund investment so that you can create and appreciate your wealth to maximum levels:

Investing too small or too big amount

It is often observed that many investors invest a very small amount via a SIP. It is fine to begin with a small amount in the beginning, however, the investment amount should be gradually increased to reap in substantial gains. Similarly, many investors begin a SIP investment with considerably huge amounts. This approach must be avoided and huge sums must be invested once the investor has enough confidence about the performance of the fund. An investor should always try to invest an amount optimal according to their financial position and investment objectives

Not investing for long term

Investors often withdraw their investment as soon as it starts giving a decent return, failing to realise that the value of a SIP investment also depends on the SIP time period. A SIP investment is capable of giving its maximum returns over a long tenure. Thus, it is advisable to remain invested for at least 3-5 years in order to earn some real good returns.

Not increasing SIP amount with time

Another mistake which investors often end up committing is they fail to increase the SIP amount with time. With an increase in disposable income, an investor should increase the SIP contribution in order to continue receiving inflation-beating returns. This must be done when an investor is confident about the fund’s performance