Investing in mutual funds through a systematic investment plan (SIP) is a great way to create long-term wealth. SIP allows you to invest a fixed amount of money in mutual funds regularly, enabling you to benefit from the power of compounding. However, with a plethora of mutual fund options available, it can be challenging to select the right mutual funds for your portfolio. In this blog, we will discuss the top 5 mutual funds for SIP in India, based on their historical performance, risk profile, and other factors.
- Mirae Asset Large Cap Fund
The Mirae Asset Large Cap Fund is an excellent option for investors looking to invest in large-cap stocks. The fund has consistently delivered superior returns compared to its benchmark index, Nifty 100, over the last five years. The fund has a diversified portfolio with holdings in blue-chip companies such as HDFC Bank, Reliance Industries, and Infosys. The fund’s expense ratio is 1.27%, which is lower than the category average, making it a cost-effective option for investors.
- Axis Bluechip Fund
The Axis Bluechip Fund is another top-performing mutual fund that invests primarily in large-cap stocks. The fund has outperformed its benchmark index, Nifty 50, over the last five years, delivering an average annual return of 17.28%. The fund’s portfolio comprises of leading companies such as HDFC Bank, Kotak Mahindra Bank, and Bajaj Finance. The fund’s expense ratio is 1.78%, which is higher than the category average, but the consistent performance makes it a worthy investment option.
- SBI Small Cap Fund
Investors looking to invest in small-cap stocks can consider the SBI Small Cap Fund. The fund has consistently outperformed its benchmark index, Nifty Smallcap 100, over the last five years, delivering an average annual return of 29.47%. The fund has a diversified portfolio with holdings in small-cap companies such as Carborundum Universal, Dixon Technologies, and Atul. The fund’s expense ratio is 1.98%, which is higher than the category average, but the potential for high returns justifies the higher expense ratio.
- HDFC Hybrid Equity Fund
The HDFC Hybrid Equity Fund is a balanced fund that invests in a mix of equity and debt instruments. The fund has delivered an average annual return of 14.48% over the last five years, outperforming its benchmark index, CRISIL Hybrid 35+65 – Aggressive, by a significant margin. The fund has a diversified portfolio with holdings in blue-chip companies such as HDFC Bank, ICICI Bank, and Reliance Industries. The fund’s expense ratio is 1.75%, which is lower than the category average, making it a cost-effective option for investors.
- ICICI Prudential Technology Fund
Investors looking to invest in the technology sector can consider the ICICI Prudential Technology Fund. The fund has consistently delivered superior returns compared to its benchmark index, S&P BSE Information Technology, over the last five years. The fund has a concentrated portfolio with holdings in leading technology companies such as Infosys, TCS, and HCL Technologies. The fund’s expense ratio is 2.06%, which is higher than the category average, but the potential for high returns justifies the higher expense ratio.
When selecting mutual funds for SIP, investors must consider various factors such as fund performance, expense ratio, portfolio diversification, risk profile, and investment objective. Investors must also pay attention to the fund manager’s experience and track record, the fund’s asset size, and the fund’s investment philosophy.
Investors must also assess their investment goals and risk appetite before selecting mutual funds for SIP. If an investor’s goal is long-term wealth creation, they may opt for equity mutual funds that offer higher returns, but with higher risk. On the other hand, if the investor’s goal is capital preservation, they may choose debt mutual funds that offer lower returns but with lower risk.
Furthermore, investors must diversify their portfolio by investing in mutual funds across different categories and sectors. This approach helps reduce portfolio risk and provides investors with exposure to different investment opportunities. Investors must also review their portfolio periodically and make necessary adjustments based on their investment goals and market conditions.
Conclusion
In conclusion, mutual funds provide investors with an excellent investment avenue to create long-term wealth through SIP. However, investors must select mutual funds that suit their investment objectives, risk appetite, and financial situation. By conducting thorough research and seeking professional advice, investors can make informed investment decisions and achieve their financial goals.
Read more useful content:
- How to invest in mutual funds
- Best Technology Mutual Funds
- All about mutual funds-types & importance
- The Power of SIP Investment in Mutual Funds
Frequently Asked Questions (FAQs)
What is a mutual fund?
A mutual fund is an investment vehicle that pools money from several investors to invest in a diversified portfolio of stocks, bonds, or other securities. The fund is managed by a professional fund manager, who invests the pooled money on behalf of the investors.
How does a mutual fund work?
When an investor invests in a mutual fund, they purchase units of the fund, and the money is pooled with that of other investors. The fund manager then uses this money to purchase a diversified portfolio of securities based on the fund’s investment objective. The returns generated from the investments are distributed among the investors in proportion to the number of units held by them.
What is SIP in a mutual fund?
Systematic Investment Plan (SIP) is a method of investing in mutual funds, where the investor invests a fixed amount of money at regular intervals, typically monthly or quarterly. SIP allows investors to benefit from the power of compounding and invest in mutual funds with small amounts of money.
What are the different types of mutual funds?
There are various types of mutual funds, including equity funds, debt funds, balanced funds, index funds, sectoral funds, and international funds. Each type of fund has its unique investment objective, risk profile, and investment strategy.
What is the expense ratio of a mutual fund?
The expense ratio of a mutual fund is the annual fee charged by the fund to cover its operating expenses, such as management fees, administrative expenses, and other costs. The expense ratio is expressed as a percentage of the fund’s assets under management.
What is the NAV of a mutual fund?
The Net Asset Value (NAV) of a mutual fund is the price at which one unit of the fund is valued. The NAV is calculated by dividing the total value of the fund’s assets by the total number of units outstanding.
What is the minimum investment in a mutual fund?
The minimum investment in a mutual fund can vary depending on the fund’s investment objective, type, and asset management company. It can range from as low as Rs. 100 to as high as Rs. 5,000 or more.
How do I select a mutual fund to invest in?
Investors must consider several factors, such as their investment objectives, risk appetite, fund performance, expense ratio, and fund manager’s track record, before selecting a mutual fund to invest in. It is advisable to seek professional advice before investing in mutual funds.
What is the difference between growth and dividend options in a mutual fund?
In the growth option, the returns generated by the fund are reinvested, increasing the number of units held by the investor. In the dividend option, the returns generated are distributed among the investors as dividends. The dividend option is suitable for investors looking for regular income, while the growth option is suitable for long-term investors looking for capital appreciation.
What is a systematic withdrawal plan (SWP)?
A systematic withdrawal plan (SWP) is a method of withdrawing money from a mutual fund at regular intervals. In an SWP, the investor specifies the amount to be withdrawn and the frequency of withdrawal, and the fund will redeem units accordingly. SWP is useful for investors who want to generate regular income from their mutual fund investments.
