Mutual fund investments made using a systematic investment plan (SIP) have shown to be a very successful long-term wealth-generating technique. Small Investment Plans (SIPs) provide investors with a systematic way to distribute their money, encouraging the steady but slow building of substantial savings via small contributions. This method, which calculates the average purchase price over time, lessens the impact of market volatility and is, therefore, perfect for those who cannot invest large amounts in bulk but still want to benefit from market growth. Moreover, mutual funds effectively improve the risk management process by offering diversification throughout a broad spectrum of businesses, sectors, and companies. Because of their systematic approach, SIPs enable investors to stick to their financial goals even in the face of brief market turbulence. Systematic Investment Plans (SIPs) are becoming increasingly popular among investors, as shown by the fact that in 2023, the amount of money flowing into SIPs exceeded all prior records. When selecting mutual funds to invest in via a SIP, performance, liquidity, cost, and flexibility must all be evaluated to provide the best potential returns. To help investors make educated investing decisions, this paper thoroughly assesses the top mutual funds for SIP in 2024, standardised across several investment parameters and risk tolerances.
What are the Best Mutual Funds for SIP?
The utilisation of a mutual fund A systematic investment plan (SIP) entails implementing a methodical approach in which investors consistently deposit a predetermined sum of money into a mutual fund. Similar to a quantitative analyst’s operations, SIPs allow investors to contribute smaller amounts regularly, usually monthly or quarterly. Customising this strategy to accommodate investors with diverse income brackets enables them to construct a diversified investment portfolio gradually but effectively methodically. SIPs have gained significant traction among retail investors owing to their cost-effectiveness, straightforwardness, and capacity to generate wealth over an extended period.
How Does Mutual Fund SIP Investment Work
Simple mechanics power an SIP. A detailed explanation follows:
Selection of Mutual Fund: Selecting a mutual fund strategy that fits the client’s investment horizon, risk tolerance, and financial objectives comes first. Investors have options among equity, debt, hybrid, and other fund types.
Registration and KYC Compliance: Investors must register with a mutual fund company or online. The Know Your Customer (KYC) procedure requires submitting identification and address confirmation.
Setting Up the SIP: Investors control recurring investment amounts and frequencies. With most SIPs, you choose the days to make monthly or quarterly payments.
Automated Investment: Following the SIP setup, the investor’s bank account immediately deducts the sum on the selected date. Using the funds, we track the purchase units of the chosen mutual fund at the current net asset value (NAV).
Compounding and Rupee Cost Averaging: Compounding helps investments over time, as the reinvested returns produce more profits. To reduce the average cost per unit, SIPs can use rupee cost averaging, which involves buying more units at low prices and fewer units at high prices.
Tracking and Managing Investments: Investors can monitor performance through regular announcements and updates about their investments. They can also stop or change their SIPs as necessary.
Key Considerations for Mutual Fund SIP Investment
Investors should tailor their investing plans to their financial goals. Before starting a SIP, you should consider a few factors. These crucial elements are listed below:
Investment Goals: List your financial objectives, such as funding for education, retirement, or real estate purchases. Various goals necessitate different types of mutual funds.
Risk Tolerance: Work out your risk tolerance. Though equity funds may be riskier, they yield more, whereas debt funds are often consistent with lower yields. Hybrid funds provide a balance.
Time Horizon: Select the amount of time you will commit. Best suited for long-term investments, SIPs usually last five to 10 years, during which time market movements balance out and compounding works as intended.
Fund Performance: Look at the mutual fund’s historical performance. Even if past success does not guarantee future results, it might provide details about the fund’s consistency and management’s abilities.
Expense Ratios and Fees: Check mutual funds’ expense and expenditure ratios. Lower cost ratios lead to higher net returns over time.
Flexibility and Liquidity: Ensure the SIP plan does not charge exorbitant costs for making easy adjustments to the investment amount, stopping payments, or redeeming units.
Diversification: Spread your holdings over many fund and asset categories to reduce risk. Diversification simplifies the process of achieving more stable returns and managing volatility.
Tax Implications: Find out what your investments mean, tax-wise. For equity funds maintained for over a year, long-term capital gains tax benefits are available; for debt funds, corresponding benefits require a more extended holding period.
Fund House Reputation: Choose mutual funds from well-known firms with a track record of handling investments well. Find out more about the fund manager’s experience and investment philosophy.
Monitoring and Reviewing: Check your SIP investments often to ensure they are moving in the right direction toward your goals. If the market or your financial situation changes significantly, you should consider changing your portfolio.
A Comprehensive Guide to Mutual Fund SIP Investment in 2024
Aditya Birla Sun Life PSU Equity Fund Direct-Growth
On March 31, 2024, the fund had an AUM of ₹3,403.63 crores and an expense ratio of 0.50%. This is a hazardous fund, with a significant 57.47% allocation to large-cap companies, 16.97% to mid-cap stocks, and 10.98% to small-cap stocks. Its investments include the State Bank of India, Bank of India, Bank of Baroda, ONGC, NTPC, Coal India Limited, Power Grid Corporation of India, GAIL (India), BHEL and IREDA.
SBI PSU Direct Plan-Growth
As of March 31, 2024, the fund’s AUM was ₹1,875.84 crores, with an expense ratio of 0.92%. It invests 91.05% in stocks, of which 39.26% are large-cap, 25.88% are mid-cap, and 17.91% are small-cap. Investments made by the fund include NHPC, NTPC, Indian Bank, State Bank of India, Canara Bank, NMDC, Indian Oil Corporation, BHEL, Oil India, Hindustan Aeronautics, ONGC, etc.
ICICI Prudential Infrastructure Direct Growth
The fund has a 5.186.46 crore AUM and a 1.03% cost ratio as of March 31, 2024. 91% of the company’s total assets are stock holdings, of which 54% are small-cap, 12% are large-cap, and 43% are medium-cap. Additionally, the debt allocation rate is 0.92%. NTPC, Gujarat Gas Limited, ICICI Bank, Interglobe Aviation Limited, Oberoi Realty Limited, and Larsen & Toubro Limited are among the companies the fund owns.
Quant Infrastructure Fund Direct-Growth
On March 31, 2024, it had a cost ratio of 0.73% and an AUM of 2,498.18 crore. 10% of the assets are debt, 92% are equities, 23% are mid-cap stocks, 25% are small-cap stocks, and 27% are large-cap stocks. Among the clients are Reliance Industries Limited, Swan Energy, The Steel Authority of India, and Adani Power Limited.
Aditya Birla Sun Life Medium Term Plan Direct-Growth
The asset under management (AUM) was 1,863.18 crore as of March 31, 2024, with a cost ratio of 0.85%. The firm invests 93% of its assets in debt, with 41% going toward government securities and the rest into low-risk investments. Belstar Microfinance Private Limited, the National Bank for Agriculture and Rural Development, LIC Housing Finance Limited, and the Government of India are notable institutions where the fund has substantial holdings.
Bank of India Short-Term Income Fund Direct-Growth
The investment had an expenditure ratio of 0.50% and a value of 82.58 crore as of March 31, 2024. The assets make up 73.02% of the business’s total assets. 26.98% are low-risk assets, whereas 39.77% are government securities. The Nation Bank for Agriculture and Rural Development, TREPS, Power Grid Corporation of India Limited, Reliance Jio Infocomm Limited, and others are among the businesses in which the fund has invested.
UTI Credit Risk Fund Direct-Growth
As of March 31, 2024, the fund had an expense ratio of 0.91% and an AUM of 395.91 crore. Organisational assets comprise government securities, comprising 35.5%; low-risk assets, 151.52%; and firm debt, 187.02%. The fund holds positions in several other companies, including Tata Projects Limited, Aditya Birla Fashion and Retail Limited, Piramal Capital & Housing Finance Limited, Godrej Industries Limited, and Tata Motors Limited.
UTI Dynamic Bond Fund Direct-Growth
As of March 31, 2024, the fund had an AUM of 382.86 crore and a cost ratio of 0.71%. Its debt comprises 134.3% government securities, while low-risk assets comprise 31.74%. The portfolio’s principal holdings are REC Limited, Clearing Corporation of India, and Power Finance Corporation Limited.
Nippon India Strategic Debt Fund Direct-Growth
As of March 31, 2024, the fund had 119.93 crores of assets under management (AUM) and a cost ratio of 0.51%. 57.38% of its debt holdings are low-risk assets, and 92.55% are government securities. Reliance Jio Infratel Private Limited, Pipeline Infrastructure (India) Private Limited, Manappuram Finance Limited, and Godrej Properties Limited are some of its principal subsidiaries.
Quant Multi Asset Fund Direct-Growth
The cost ratio of the fund stood at 0.76% as of March 31, 2024, while its assets under management (AUM) totalled ₹1829.08 crores. In terms of equity distribution, large-cap (19.77%), mid-cap (17.03%), and small-cap (8.23%) companies collectively comprise 65.84%. 4.2% of the 6.89% debt investment consists of government securities, while 2.69% contains low-risk assets. This investment vehicle holds shares in numerous companies, including but not limited to JIO Financial Services Limited, Hindalco Industries Limited, Reliance Industries Limited, Orchid Pharma Limited, Adani Power Limited, and Bharat Highways InvIT.
Conclusion
Using SIPs for mutual fund investments is a wise way to achieve long-term financial success because of its many benefits, which include compounding, rupee cost averaging, and disciplined investing methods. Because mutual funds are flexible and flexible, investors may customise their portfolios to fit their risk tolerance and financial goals. When compiling our list of the 10 best mutual funds for SIP in 2024, we assessed each investment choice based on its historical success and future development potential. The funds under dispute include investments in debt, commodities, hybrids, and equities. People looking for stability with debt funds or significant profits with equity funds might discover workable solutions to meet their goals. Thorough research and regular portfolio evaluation are essential to ensure an investment portfolio aligns with changing financial goals. SIPs include some risk even if they provide a disciplined and comparatively low-risk way to participate in the stock market. As such, one may increase the advantages of SIP investing by keeping information and making necessary changes. Using a disciplined investing strategy and choosing suitable mutual funds, individuals may successfully build significant wealth and accomplish their primary financial goals.
FAQs
What is a Mutual Fund SIP?
Discover the power of a systematic investment plan (SIP) that allows your portfolio to grow steadily through regular, scheduled contributions to a mutual fund, typically monthly or quarterly.
How does a SIP work?
Compounding and rupee cost averaging allow an SIP to automatically debit your bank account at a predefined amount to buy mutual fund units at the current NAV.
What are the benefits of a SIP?
SIPs offer disciplined investing, flexible, varied return compounding, and rupee cost averaging at an affordable price.
What should I consider before starting a SIP?
Think about your goals, risk tolerance, investment duration, the fund’s performance, cost, flexibility, liquidity, and the fund house’s positioning.
Can I modify or stop my SIP?
SIPs are rather versatile. The amount of SIP, halting, or pausing had no significant impact.
