Systematic Investment Plan or SIP is a convenient investment process that allows investors to invest a fixed sum regularly in mutual funds. Investments can be made on an annual, quarterly, monthly, weekly, or daily basis. A fixed amount is debited from the investor’s account and invested in mutual funds.
Investment in mutual funds via SIP (Systematic Investment Plan) has become a popular way to invest among Indians specially the youth. SIP is a great way to create long term wealth as it helps in building a disciplined approach to investing without worrying about market volatility. There is a huge spike in retail participation as far as the investment through SIP is concerned. No wonder the number of SIP accounts in India is rising at a rapid pace.
As per AMFI India statistics, the number of mutual fund SIP accounts in India stood at about 6 crores in Nov’22. The SIP inflows from these accounts stood at Rs. 13,306 crores in Nov’22, up from Rs. 11,000 crores in Nov’21. It is clear from these figures that more and more Indians are choosing to invest in equity markets via SIP mode to build their corpus and achieve their financial goals.
What is SIP (Systematic Investment Plan)?
SIP or Systematic Investment Plan is a method offered by all the Mutual Fund Companies (Asset Management Companies) wherein the investor invests a fixed amount at regular intervals in a mutual fund scheme of his choice. SIP helps the investor invest in small amounts rather than investing a huge lump sum amount without worrying about timing the market. The best part is the returns from a SIP are higher than done in a lump sum manner over a long period in the majority of the instances.
Benefits of SIP
SIP is very easy to set up. Once the investor applies for a SIP, a pre-fixed amount is automatically debited from his bank account and invested in the mutual fund scheme of his choice. SIP has many benefits over lump- sum and that makes it the preferred choice amongst the investors.
Some benefits of a Systematic Investment Plan are:
Rupee cost averaging
The biggest benefit of a SIP is its advantage of rupee cost averaging. Rupee Cost Averaging means averaging the value of your investment by investing at regular intervals instead of investing in a lump sum.
Markets are known for their ups and downs. It is difficult for a normal investor to predict market movements. In such cases, SIP investments come across as a great tool to average out your investment cost. When the markets are down, you could buy more units of a mutual fund and when markets are high, you end up with a lesser number of units. This way, over the long term, your average cost comes down when compared to investing a lump sum.
An example might help you understand this concept better
| Amount of SIP | Net Asset Value of 1 unit of Mutual Fund (Cost) | No of units purchased | |
| Jan | 2000 | 45.7 | 43.76 |
| Feb | 2000 | 48.0 | 41.67 |
| Mar | 2000 | 43.5 | 46.0 |
| Apr | 2000 | 44.0 | 45.45 |
| May | 2000 | 49.2 | 40.65 |
| June | 2000 | 47.5 | 42.10 |
The total amount of investment over 6 months: Rs 12000
Total number of units of mutual fund purchased: 259.63
Average Cost of investment: 46.21 per unit
Helps you become a disciplined investor
When you set up a SIP, money deducted from your bank account goes into mutual funds at regular intervals which saves time and effort. You need not be a stock market expert to know how the market moves. You can sit back and relax as far as investing is concerned.
Power of compounding
The investment automation done through SIP makes sure you never miss out on your investments as opposed to investing in a lump sum manner. The small amounts contributed result in a large corpus and the returns are compounded over the long term.Can start with a small amount
How much do you need to start a Systematic Investment Plan? A common question that comes up especially from the millennials. Well, the best part of a SIP plan is that you can start as low as Rs.100/- per month. Yes, it is that easy and pocket-friendly.
Convenience
You can easily set up a mandate for SIP each month and the amount will get debited without intervention from your end.
Helps you plan your finances better
As you are aware of the SIP amount that will get debited from your account each month, it will help you help your other expenses better.
Best Mutual Funds SIP Plans to invest in 2023
A big question that comes to everyone’s mind is, “Is this the right time to invest?” Well, as the saying goes- the best time to invest was 20 years ago and the next best time to invest is now. So irrespective of whether the markets are high or low, you should start investing as early as possible.
If you are looking to start your investment journey or if you are an existing investor here is a list of best mutual funds SIP plans to invest in India this year. The mutual fund plans listed here are predominantly equity funds. The funds are from different categories so that will help you diversify your portfolio. Investors are advised to conduct their due diligence or should consult their financial advisor before selecting a fund for investment. It should also be noted that the past performance of the funds is not indicative of future performance.
Axis Bluechip Fund
About the fund
As the name suggests this fund invests in the blue-chip companies listed on the stock market.
This fund invests in large-cap companies. This fund is suitable for investors looking to create long term wealth. The ideal SIP amount would vary from person to person. You could start a SIP in this fund with Rs 500/-.
| Inception Date | January 1, 2013 |
| Benchmark Name | S&P BSE 100 Total Return Index |
| Fund Manager | Shreyash Devalkar |
| Expense ratio | 1.63% |
| Fund type | Open-ended |
| Risk | Very high |
Historical Returns of the Fund (annualised)
| 6-month | 1-Year | 3-Year | 5-Year | 10-Year |
| 9.41% | -4.63% | 12.20% | 12.46% | 13.92% |
Aditya Birla Sun Life Nifty 50 Index Fund Growth
About the fund
This is an open-ended equity scheme tracking Nifty 50 TRI. This is a passively managed fund that aims to provide returns which closely correspond to the returns of the Nifty. This fund option is rated as very high risk and it requires a minimum SIP investment of Rs. 1,000.
| Inception Date | 18th September 2002 |
| Benchmark Name | Nifty 50 TRI |
| Fund Manager | Mr. Lovelish Solanki |
| Expense ratio | 0.60% |
| Fund type | Open-ended |
| Risk | Very high |
Historical Returns of the Fund (annualised)
| 6-month | 1-Year | 3-Year | 5-Year | 10-Year |
| 14.48% | 6.26% | 16.06% | 12.88% | 12.30% |
Kotak Emerging Equity Scheme Growth
About the fund
Kotak Emerging Equity Scheme Growth is a mid-cap fund having investments in equity and equity-related securities in mid-cap companies. This is an open-ended fund with an exit load of 1% if the fund is sold before the completion of 12 months. The objective of the fund is to provide long-term capital appreciation by investing predominantly in Midcap companies.
| Inception Date | March 30, 2007 |
| Benchmark Name | NIFTY Midcap 150 Total Return Index |
| Fund Manager | Mr. Pankaj Tibrewal |
| Expense ratio | 1.70% |
| Fund Type | Open-ended |
| Risk | Very high |
Historical Return of the Fund (annualized)
| 6-Month | 1-Year | 3-Year | 5-Year | 10-Year |
| 15.98% | 6.95% | 25.09% | 13.96% | 19.10% |
Edelweiss Midcap Fund Growth
About the fund
Edelweiss Midcap Fund Growth is another open-ended equity midcap fund predominantly investing in midcap companies that are potential wealth creators. The scheme sleets the stocks to invest in based on careful analysis of the company, its products, growth potential, potential to withstand the downturn of the economy, etc.
| Inception Date | December 26, 2007 |
| Benchmark Name | NIFTY Midcap 150 Total Return Index |
| Fund Manager | Mr. Trideep Bhattacharya and Mr. Sahil Shah |
| Expense ratio | 2.06% |
| Fund Type | Open-ended |
| Risk | Very high |
Historical Return of the Fund (annualized)
| 6-Month | 1-Year | 3-Year | 5-Year | 10-Year |
| 16.61% | 5.79% | 27.00% | 13.19% | 19.76% |
HDFC Small Cap Fund
About the fund
HDFC Small Cap Fund aims to offer opportunities to investors for long-term growth and liquidity through investments in a well-diversified basket of equity securities, primarily of small-cap companies (minimum 65%).
| Inception Date | 3rd April 2008 |
| Benchmark Name | S&P BSE 250 SmallCap Total Return Index |
| Fund Manager | Mr. Chirag Setalvad |
| Expense ratio | 1.99% |
| Fund type | Open-ended |
| Risk | Very high |
Historical Returns of the Fund (annualised)
| 6-month | 1-Year | 3-Year | 5-Year | 10-Year |
| 21.92% | 8.05% | 29.19% | 13.17% | 17.90% |
Kotak Small Cap Fund
About the fund
The principal objective of Kotak Small-cap fund is to generate capital appreciation through investment in various equity & equity-related securities of small-cap companies. The scheme is designed to offer potential growth benefits offered by small-cap securities.
| Inception Date | 24th February 2005 |
| Benchmark Name | NIFTY Smallcap 250 Total Return Index |
| Fund Manager | Mr. Pankaj Tibrewal |
| Expense ratio | 1.89% |
| Fund type | Open-ended |
| Risk | Very high |
Historical Returns of the Fund (annualised)
| 6-month | 1-Year | 3-Year | 5-Year | 10-Year |
| 10.49% | -1.31% | 32.76% | 15.78% | 18.79% |
Edelweiss Balanced Advantage Fund
About the fund
This is an open-ended fund launched in 2009 from the fund house of Edelweiss Mutual Funds. The basic details of the fund are given below.
| Particulars | Details |
| Fund manager | Mr. Bharat Lahoti |
| Launch date | 20th August 2009 |
| Minimum SIP investment | Rs. 1,000 |
| Expense ratio | 1.76% |
| Risk | Moderately high |
Historical Returns of the Fund (annualised)
| Period | 6 months | 1 yr | 3 yrs | 5 yrs | 10-Year |
| Returns | 9.28% | 3.77% | 15.17% | 11.05% | 11.40% |
Mistakes to avoid while doing a SIP
Investments through SIP are a comfortable way to invest in Indian equity markets. It facilitates investors to build a huge corpus without making investments in a lump sum manner. However, if the SIPs are not used correctly, they can cause you a lot of trouble. The majority of investors make so many common mistakes while investing in Indian mutual funds through SIP mode. Here is a list of mistakes that you should avoid while investing via SIP:
- Timing the market: Many investors try to time the markets and in the process do not even start or start very late. They should know that it requires a lot of knowledge and expertise to time the markets. The easy way to start investing is to do it with a SIP for the long term. Remember the time spent in the market is much better than timing the market.
- Discontinuing the SIP: Investors should always keep in mind that investing in equity mutual funds should be done from a long term perspective to reap maximum benefits. However, many first time investors do not have enough patience to continue their SIP when they find that their portfolios are in red. The ideal thing to do is to ignore it and do not shy away from continuing the SIP.
- Selection of mutual fund scheme: Selection of a mutual fund scheme is very critical to your investment journey. The fund should be selected keeping in mind one’s financial goals, risk appetite, and liquidity requirements. But many investors ignore this and select the fund that has given the highest returns in the recent past. It is not the right thing to do. They should do their due diligence and then select the fund that suits them.
- Choosing SIP tenure and amount: Investors should know the right amount and the tenure of SIP that will help them achieve their goals. Many investors select a very less amount of SIP and end up being short of the required corpus. They should do a thorough study and find out the correct SIP amount. Some investors start with a small amount of SIP because they do not have adequate liquidity. In such cases, investors should consider raising the SIP amounts at a later stage so that the financial goals are met on time.
- Not monitoring the SIP: Another common mistake that investors commit is that they fail to track or monitor their SIPs. They are under a misconception that SIPs are for the long- term and therefore it does not require monitoring at all. It should be noted that even the best of funds with the best of the fund managers requires monitoring at regular intervals.
Conclusion
A systematic Investment Plan is a simple and easy way to build wealth. You could get a variety of investment plans based on your goals and risk profile or you choose a fund of your choice to invest through on Fisdom . Download the app to explore more.
FAQs
The minimum amount to invest in a fund through SIPs depends on the individual fund and can range anywhere between Rs. 100 to Rs 1,000 or more.
Yes, the exemption of up to Rs. 1,00,000 on long tern capital gains is available on SIPs too.
Some of the biggest advantages of investing through SIPs includes the averaging of cost of investment and the benefit of compounding.
Investment made in ELSS funds through SIP mode is deductible under section 80C up to Rs. 1,50,000
Yes, for starting an SIP a bank account must be linked to the investment account. The SIP amount is deducted periodically from the bank account as per the mandate authorized by the investor.
