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Best SIP Plans to Invest in India

When you consider investing in Mutual Funds you usually debate about, whether it is better to invest in one payment, or, divide the amount over regular intervals. Though there’s no argument for or against, the latter is simply more popular.

A Systematic Investment Plan or SIP Plan is a method of making investments, especially in mutual funds. As an investor, you can begin any of these best SIP plans by investing a certain amount at regular intervals. There are variations in how frequently or how much you can invest. The preferred frequency is 1 month, however, there are others as well. As far as the invest amount is concerned, there are no upper or lower limits, there are, however, different types. Here are the best mutual funds for SIP:

  • Top-Up SIP:This plan allows you to increase or ‘top-up’ your investment amount in future. This has a twin benefit, one you can increase your amount when your income increases and two, you have more schemes to choose from.

  • Flexible SIP:This plan lets you change your investment amount based on your cash-flow. If you think you should skip a payment, that’s also possible. Moreover, you can pay a higher amount if you have more money at hand.

  • Perpetual SIP:There’s usually a lock-in period for these plans, but in this type of plan, an end date is not mandatory. Which also means, you can redeem your investment when you require, however, it is advisable to set an end-date for your investment. The reason is, it makes defining financial investment milestones easier.

  • Trigger SIP:This type of plan allows you to set a ‘trigger’ to make an investment. The trigger can be a target date, NAV or index benchmark. However, some investment experts equate this method with stock speculation.

  • Planned Savings:This type of plan lets you define realistic investment goals. Be it short-, medium- or long-term, if it’s realistic, it is scalable to achieve through systematic payments.

  • Compounded Wealth:This type of plan makes your money work for you. It helps not only to save, but also grow.

  • Flexibility:Some plans offer options to change or increase the investment amount based on your needs or money at hand.

  • Convenience:You can consent to have the investment amount automatically debited from your bank account.

  • End-Date: Most of these plan types have a preset date for redemption, however, it is recommended to hold your investments for at least 3-5 years for maximum benefits.

  • Moderate Risk and High Returns: Since you’re investing in parts, your risk is apportioned over intervals. Moreover, since market cycles are neither predictable, nor, constant, the extent of risk will vary. When markets are in a slump, your returns on investment may be low, however, when markets move upward, the NAV of your holdings will move upward as well. This will result in exceptionally good returns over intervals.

  • Tax-Benefit: You can claim income-tax benefits under section 80C of the Indian Income Tax Act—1961. However, you’ll need to check the investment limit and whether tax on dividend payments or long-term capital gains (LTCG) may apply.

    The top SIP plans are evaluated based on the NAV of the individual securities within its portfolio. In positive market cycles the NAV is high, which in turn gives you great returns on investment. Due to fluctuating NAV in different market cycles, the number of units will differ with each purchase, even if your payment amount is the same. The best funds for SIP will not only give good returns on investment, but also be cost-effective.

Top Mutual Funds for SIPs in 2019

2018 has not been too friendly toward equities, as markets may continue to be volatile in the first quarter of 2019; market experts recommend mutual funds over direct trading. Systematic Investment Plans remain a preferred option to put money in these funds. The top SIP plans are selected based on:

  • Funds which have been able to recover from losses due to market volatility, in the last year.

  • Overall good performance in 3-, 5- & 10-year time-frames.

  • Fund rating by CRISIL—a credit rating in India.

To get the maximum benefits from your fund, market experts recommend an investment holding period of between 3-5 years.

Factors to Consider Before Investing in the best fund for SIP

The best SIP plans are a way for individuals on a fixed income to be able to compound wealth. However, like any major decision, you need to consider some things before investing in these plans.

Define Your Financial Goals:Set clear and realistic investment goals. Like any mutual fund investment, putting your money in these plans will be more beneficial if you hold your investments longer. Be it a new house, future education or retirement savings, all these need a time-frame to be realised.

Past Performance: Ideally the best SIP plans to invest should have a performance track-record over a 5-10-year period. A medium to long-term timeline gives you an idea of how the NAV fluctuates and recovers in varied market cycles. A new plan may look appealing, but it may be unwise and at times risky, because of the lack of substantial information.

Security Profiles: Each mutual-fund plan comprises of underlying securities. You need to research these before investing. Moreover, related news and market updates help provide additional data to make the righ decisions.

Risk Appetite: There are 3 kinds of risk tolerance levels, conservative, moderate and high. If you’re a conservative investor, you will be risk averse or have no to a very low appetite for bearing risk. A moderate investor will have some tolerance for risk and will make smart investment decisions to overcome losses. An aggressive investor has a very high appetite for risk and is prone to make quick investment decisions. Your choice of investment and the subsequent rate of returns will be vastly different based on your risk profile.

Cost Effectiveness: You must consider the expense ratio of a fund before investing. A high expense ratio means the fund is expensive, a low expense ratio means the fund is a great choice to buy. Another thing to consider is the cost to redeem or sell. Holding your investment for a longer period makes your plan more cost-effective.

Returns on Investment: Though there is no guarantee that fund will replicate its past performance, it always helps to research previous returns. The best plans will give you optimum returns on your investments.

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