Mutual fund investments have been a staple part of almost every investor’s portfolio on account of their multiple benefits. Investors have the benefit of investing in the diverse category of funds that center on either equity or debt instruments or a mix of both. Every mutual fund has the option to either make a lumpsum investment or invest through SIPs. SIPs have made the investment in mutual funds quite feasible and increased its reach to even the remotest part of the country as well as the smallest investors. Find out which are the top SIP Investment Plans for the Next 5 Years
Understanding SIPs better
SIPs or Systematic Investment Plans is a convenient investment option where investors can start their investment portfolio with an amount as low as Rs.500 or even Rs.100 in some cases. Investors have to first select their target funds to start SIP plans. The next step is to set a target date and the amount of SIP that is to be debited from the bank account at periodic intervals (usually per month). On such date, the amount will be debited from the investor’s bank account and additional units of the fund will be added to the investor’s portfolio. The number of units to be added will depend on the prevailing NAV.
There are three types of SIPs for investors to choose from. These are top-up SIPs (increasing the SIPs by a fixed percentage at regular intervals), flexible SIPs (flexibility to alter the SIP plan based on the availability of funds), and perpetual SIPs (SIP investments till perpetuity).
Read more: How do perpetual SIPs work?
Best SIP plans for 5 years in FY 23-24
Investing in long term investments plans that usually have an investment horizon of 5 years or more can be done easily through SIPs. Investors can invest across different market capitalizations as well as different types of funds that help in achieving their long-term goals. Investing for longer time horizons also allows the fund to ignore the short-term volatility which is a prime concern for investors. Some of the popular SIP plans for 5 years or more belong to the long-term mutual funds and hybrid mutual funds. The top funds in these categories are mentioned hereunder.
Long-term mutual funds
Long-term mutual funds are funds that are invested for a period of more than 12 months in the case of equity funds and more than 36 months in the case of debt funds. Some of the top long-term mutual funds to be invested through SIPs are,
1. Parag Parekh Flexi Cap Fund
This fund is an open-ended equity fund that aims to provide capital appreciation through long-term investments in equity and equity-related instruments. The details of this fund are tabled below.
| Particulars | Details |
| Fund manager | Mr. Raj Mehta |
| Launch date | 24th May 2013 |
| Minimum investment | Rs. 1,000 |
| Expense ratio | 1.93% |
| Risk | Very High |
The returns provided by the fund as of 25nd August 2023 are tabled below
| Period | 6 months | 1 yr | 3 yrs | 5 yrs | Since launch |
| Returns | 16.81% | 18.04% | 22.51% | 17.47% | 18.46% |
2. Mirae Asset Tax Saver Fund
This fund belongs to the ELSS category of funds with a minimum lock-in period of 3 years. The key details of this fund are tabled below.
| Particulars | Details |
| Fund manager | Mr. Neelesh Surana |
| Launch date | 28th December 2015 |
| Minimum investment | Rs. 500 |
| Expense ratio | 1.72% |
| Risk | Very High |
The returns provided by the fund as on 25th August 2023 are tabled below
| Period | 6 months | 1 yr | 3 yrs | 5 yrs | Since launch |
| Returns | 16.01% | 14.4% | 22.91% | 15.20% | 19.54% |
3. Canara Robeco Emerging Equities fund
This is an open-ended fund having Nifty Large Midcap 250 TRI as the benchmark. The key details of the fund are tabled below.
| Particulars | Details |
| Fund manager | Mr. Shridatta Bhandwaldar |
| Launch date | 11th March 2005 |
| Minimum investment | Rs.5,000 |
| Expense ratio | 1.83% |
| Risk | High |
The returns provided by the fund as on 25th August 2023 are tabled below
| Period | 6 months | 1 yr | 3 yrs | 5 yrs | Since launch |
| Returns | 14.93% | 11.05% | 21.47% | 12.85% | 20.47% |
Top Hybrid mutual funds for SIP for 5 years
1. Quant Absolute Fund
This fund belongs to the hybrid fund category and aims for long-term capital appreciation by investing in fixed income and equity instruments. The key details of the fund are tabled below.
| Particulars | Details |
| Fund manager | Mr. Ankit A Pande |
| Launch date | 21st March 2001 |
| Minimum investment | Rs.5,000 |
| Expense ratio | 2.31% |
| Risk | Very High |
The returns provided by the fund as of 25th August 2023 are tabled below
| Period | 6 months | 1 yr | 3 yrs | 5 yrs | Since launch |
| Returns | 11.5% | 8.05% | 26.05% | 19.01% | 17.12% |
2. ICICI Prudential Equity & Debt Fund
This fund belongs to the aggressive hybrid fund category with a major allocation to equity instruments. The key details of the fund are tabled below.
| Particulars | Details |
| Fund manager | Mr. Manish Banthia |
| Launch date | 3rd November 1999 |
| Minimum investment | Rs.5,000 |
| Expense ratio | 1.78% |
| Risk | Very High |
The returns provided by the fund as of 25th Aug 2023 are tabled below
| Period | 6 months | 1 yr | 3 yrs | 5 yrs | Since launch |
| Returns | 13.83% | 17.84% | 26.74% | 15.94% | 17.04% |
3. Edelweiss Aggressive Hybrid Fund
This is a regular plan of the fund is from Edelweiss Mutual Fund and belongs to the aggressive hybrid fund category. The key details of this fund are tabled below.
| Particulars | Details |
| Fund manager | Mr. Bharat Lahoti |
| Launch date | 12th August 2009 |
| Minimum investment | Rs.5,000 |
| Expense ratio | 2.36% |
| Risk | Very High |
The returns provided by the fund as of 25th August 2023 are tabled below
| Period | 6 months | 1 yr | 3 yrs | 5 yrs | Since launch |
| Returns | 13.49% | 16.38% | 20.31% | 12.23% | 11.44% |
What are the benefits of investing through SIP?
There are multiple benefits of investing in mutual funds through SIPs which has made it an attractive investment option for millions of investors. Some of the key benefits of investing through SIPs are highlighted below.
- Lower capital investment
The top advantage of investing through SIPs is the lower capital investment. Investors can start creating their portfolio with nominal amounts and therefore, it is easily accessible to every investor. Many investors who usually do not have a sufficient corpus to invest in a lumpsum manner often tend to procrastinate their investments. SIPs are an excellent option to start investments and eventually achieve the goal of wealth creation.
- Flexibility of investment
Investment through SIPs allows the investors the flexibility to invest on their own terms. Investors can start a SIP at any point and can exit the same based on their individual discretion. Also, depending on the availability of the funds and the prevailing market conditions, investors can modify their SIPs as well as increase or decrease the same.
- Benefit of compounding
The golden rule of investing through SIPs is to start as early as possible to gain maximum advantage from the fund. By investing early, investors can get the maximum benefit of compounding and increase their wealth at a relatively faster pace.
- Benefit of Rupee Cost Averaging
Another important advantage of investing through SIPs is the benefit of Rupee Cost Averaging. This essentially implies that investing a constant amount periodically irrespective of market trends will allow the investors to eventually average out the cost of units purchased. To achieve this benefit it is imperative that the SIPs be continued for an extended period of time.
- Discipline to save and invest regularly
Most investors, especially young and new investors who have recently started earning, often find it difficult to save and invest regularly. By investing in mutual funds through SIPs, such young investors can inculcate a disciplined habit of saving and investing which can eventually help them in increasing their savings and investing aggressively.
How are SIPs taxed 2023?
The taxation of SIPs is similar to the taxation of mutual funds based on their dominant asset class. The duration for which an asset is held is also considered while determining the taxation for mutual fund investments through SIPs. The returns from mutual funds can be in the form of dividends or in the form of gains, the dividends received through mutual funds are taxed at the applicable slab rates in the hands of the investors post the amendment in the Budget of 2020.
The capital gains from the mutual fund investments through SIPs are taxed as per the below table.
| Type of mutual funds | Duration for STCG | Tax rate | Duration for LTCG | Tax rate |
| Equity mutual funds | Less than 12 months | 15% (plus cess and surcharge) | 12 months and more | Exempt up to Rs.1,00,000Above Rs.1,00,000 taxed at 10% (plus cess and surcharge) |
| Debt mutual funds | Less than 36 months | Slab rate of investor | 36 months and more | 20% (plus cess and surcharge) |
| Hybrid equity oriented mutual funds | Less than 12 months | 15% (plus cess and surcharge) | 12 months and more | Exempt up to Rs.1,00,000Above Rs.1,00,000 taxed at 10% (plus cess and surcharge) |
| Hybrid debt oriented mutual funds | Less than 36 months | Slab rate of investor | 36 months and more | 20% (plus cess and surcharge) |
Why Invest in a SIP in 2023?
Here are four reasons to invest in SIP:
- Disciplined investing: SIPs encourage disciplined investing by allowing investors to invest small amounts of money regularly. This approach helps investors to avoid the temptation of timing the market and invest regularly in a disciplined manner.
- Long-term wealth creation: SIPs offer the potential for long-term wealth creation by allowing investors to take advantage of the power of compounding. By investing regularly over a long period, investors can benefit from the effect of compounding on their investments.
- Flexibility: SIPs are flexible and allow investors to start investing with small amounts. Investors can choose the amount they want to invest and the frequency of investments based on their financial goals and risk appetite.
- Rupee-cost averaging: SIPs adopt the rupee-cost averaging approach, which means that investors get more units when the market is down and fewer units when the market is up. This approach helps investors to average out the cost of investments and reduce the impact of market volatility on their investments over the long term.
Conclusion
There are various options for SIP plans with an investment horizon of 5 years or more. These investments have the benefit of wealth creation for a longer period of time and allow the investors to achieve their goals in a faster and more efficient manner. These investments also tend to generate returns that are often able to beat their benchmark over the longer investment horizon.
FAQs
Mutual funds suited for long term investments such as equity mutual funds or hybrid mutual funds work well for SIP for 5 years.
Other than ELSS funds that have a lock in of 3 years, SIPs can be done for any tenure. But you will have to bear in mind that there may be exit loads /capital gains tax on the investment when redeeming a particular investment.
Yes. There is no restriction on the number of SIPs that can be started by an investor. Hence, investors can start multiple SIPs at the same time with different AMCs.
Some limitations of investing in mutual funds through SIPs are
The limited flexibility in the date of SIPs (date of investments)
Lower SIP returns in the consistently rising markets as compared to lumpsum investment
Unsuitable for investors who may have unpredictable or irregular incomes
Delay in instructions to start, stop or modify the SIP mandates.
Insufficient funds in the bank account can result in dishounor of cheque or ECS mandate which can lead to legal action against the investors.
