SIP or Systematic Investment Plan may be defined as a unique financial planning tool that allows an individual to invest in mutual funds in a disciplined fashion and in small installments to create a large corpus for future financial security. Thus, the SIP route allows you to efficiently manage your day-to-day finances, while also ensuring that you start saving early in life towards a future target corpus. This makes perfect sense when you consider that if you are salaried, you get paid every month, hence it is more sensible to put away a portion of your salary as soon as it gets credited to your account instead of trying to put away a large amount in one go later.
How SIPs Works
A systematic investment plan can be weekly, monthly or quarterly in nature, i.e. investments can be made at various intervals according to the requirement of the investor. Nowadays, with the advent of internet banking and online ECS mandate, you no longer have to worry about executing individual SIP requests as these get done automatically. However, the monthly SIP plan is the most commonly availed option among investors as most of us get paid once a month. The amount deducted is then invested in the mutual fund scheme of your choice according to the applicable NAV.
For example, let’s say you set up a Rs. 1,000 monthly SIP plan for 12 months starting from the 7th of the month. Every month around the same date, your bank account will show a Rs. 1000 deduction towards investment in the mutual fund of your choice. The case of applicable NAV is based on whether the 7th is a day when the markets are open or closed. If the 7th is a working day for the stock market, the applicable NAV for your SIP installment would be the chosen mutual fund’s NAV at the close of markets on the 7th. If 7th is a holiday such as a Saturday, Sunday or Public Holiday, then the applicable NAV would be the one obtained at the end of the next working day.
How to Select the Best SIP Plan for Your Investment Goals
It is common knowledge that when planning to buy stocks, it is important to choose the right one. Otherwise, you might be stuck with an underperforming investment or even worse, an investment where you might incur a loss. The same is true when you decide to invest in a mutual fund. In case you are planning to invest in a monthly SIP Plan of a mutual fund, it is obvious that you want your money to grow at the fastest possible rate, while also being less susceptible to common mutual fund investment risks such as volatility and low liquidity. This is not an easy combination to come across. However, in the following sections, we will discuss some leading equity mutual funds that would be ideal from the point of view of equity investments. Moreover, quite a few of these funds in the following sections are actually tax-saver ELSS mutual funds; hence they are capable of providing a dual benefit.
Choose Best Mutual Funds to Invest via SIP Plans
The following is a short list of equity mutual funds that provide the best option for individuals seeking to invest in high ROI schemes via the SIP Plans route. The key criteria used to pick these funds from the wide range of available investment options were as follows:
All these funds have shown exceptional performance over the past 3 to 5 years.
CRISIL Rated funds of Ranks 1 and 2 have been placed towards the top of the list.
High rating of 4 or above was obtained by all of these funds from Value Research Online.
Additionally, this list also features inputs from Paisabazaar.com’s in-house experts who have extensive experience in selecting the best investments depending upon the changing conditions of India’s securities market.
ICICI Prudential Focused Bluechip Equity Fund
The strategy of this fund is to primarily invest in the 20 leading companies in the top 200 companies (according to market capitalization) listed on the National Stock Exchange, Mumbai. However, after crossing the Rs. 1,000 crores mark, the fund has started investing in companies outside the original top 200 list. As of now, a majority of the fund’s investments i.e. around 95% is in large cap stocks, which ensures stability and consistency for those seeking long term capital appreciation. With a track record of consistently outperforming its peers, the ICICI Prudential Focused Bluechip Equity Fund definitely offers a top rated SIP plan for those seeking systematic investments in an equity mutual fund.
DSP BlackRock Tax Saver
SIP plans can truly be your best friend if you are looking for tax saving investments that do not stress your finances in the final quarter of the financial year. One of our top recommendations in the ELSS category for SIP plan is the DSP BlackRock Tax Saver Fund. This tax saving mutual fund scheme is focused on generating a capital appreciation of investments in the medium to long term through a diverse range of investments. The major investment areas in the purview of this scheme are equities and various equity derivatives. In terms of its track record, the DSP BlackRock Tax Saver Fund was launched in January 2007 by DSP Blackrock Fund and has consistently outperformed its benchmark as well as most of its peers in both the 3 year and 5 year ROI categories.
Franklin India Prima Plus Fund
Franklin India Prima Plus Fund is the premier equity fund offering from the Franklin India Mutual Fund AMC, one of India’s leading fund houses. The proposed aim of this mutual fund scheme is to provide capital appreciation along with regular dividend income to the investors. In order to achieve this goal, the fund has primarily invested in a range of securities across equity, debt and money markets. The fund is also expected to focus their investments on companies capable of creating wealth irrespective of market capitalization and sector bias. At present, an estimated 75% of this equity mutual fund’s portfolio consists of large cap equity investments, while the remainder is spread across other investment options. Franklin India Prima Plus Fund has provided returns of over 18% and in excess of 19% over the past 3 years and 5 years respectively.
ICICI Prudential Value Discovery Fund
In case you are looking for SIP plans that invest in an equity fund focused on making value stock investments, you need to look no further as the ICICI Prudential Value Discovery Fund fits the bill perfectly. The opinion of what exactly are “value stocks” may vary from one expert to another, however, these stocks do share a few common traits. These stocks are expected to have great future growth potential while being reasonably valued in the current market conditions. Alternately, these stocks feature attractive low valuations with respect to their book value, earnings or future/current dividends. The strategy has worked out quite well for this ICICI Prudential AMC fund as it has consistently maintained a high rating since its launch way back in 2004. Originally the fund was quite heavily invested in mid-cap stocks, which made it seem like a risky investment to risk-averse investors, but in recent times, its large cap exposure has grown to be as high as 80%, which signals an increase in the possibility of consistent future returns in the long term.
Axis Long Term Equity Fund
The Axis Long Term Equity Fund has been one of the most favoured SIP plans for investors seeking consistent returns on their tax saving investments. The mutual fund is focused on generating consistent ROI in the long term through a portfolio comprising high-quality equity stocks and equity derivatives. The exceptional performance of this mutual fund is best illustrated by the fact that the Axis Long Term Equity Fund has managed to provide consistently high returns to its investors outperforming its benchmark as well as its peers since its launch over a decade back. With returns computed at over 17% and in excess of 23% over the 3-year and 5-year periods, this premier tax saving ELSS fund offering has been a preferred investment choice for Indian mutual fund investors from various walks of life.
Reliance Tax Saver (ELSS) Fund
The Reliance Tax Saver (ELSS) Fund is probably the best-kept secret among tax saver funds that have provided consistently high returns to its investors since its launch. Launched in September 2005, this 80C deductible investment is deemed ideal for investors seeking growth of the principal amount invested in the long term and the fund predominantly invests in equities and a range of equity-linked securities. The fund has followed a multi-cap approach till date with up to 60% being invested in large capitalization stocks, while the balance amount is invested in a mix of mid- and small-cap investments. The fund’s 3 and 5 year returns currently stand at over 17% and over 22% respectively, which is significantly higher than the ELSS fund’s benchmark. Investing in this fund through SIP plan is a near sure shot way to make your wealth grow in the future.
DSP BlackRock Opportunities Fund
The primary objective of the DSP BlackRock Opportunities Fund is to provide capital appreciation to its investor while the secondary objective is to generate income as well as ensure dividend distribution. The focus of this leading equity mutual fund has been to invest in top-rated equities as well as equity-linked investments in order to achieve its stated objectives. Moreover, in order to distinguish itself from its peers, the fund has historically maintained a highly diversified portfolio of investments, which has helped achieve its aim to consistently and significantly outperform competing equity funds. With 3 year and 5-year returns provided by DSP BlackRock Opportunities Fund currently computed at over 19% and over 23% respectively, this equity investment is one of most suitable for investors seeking a high performing SIP Plan investment to meet their long-term investment goals.