Best SIP Mutual Funds To Invest In India (2023) – Its Types And Taxation
A Systematic Investment Plan (SIP) is a convenient way to invest a fixed sum in mutual funds. For investors with a low-risk appetite, an SIP is one of the most effective ways of investing in mutual funds. With SIPs, you can invest a small fixed amount regularly and end up accumulating good returns on your investments.
In addition, it makes investing much easier as it instils financial discipline among investors and also yields high returns in the long run. You can use a SIP calculator to calculate returns on your investments.
Let us take a look at some of the best SIP plans providing excellent returns. Read on!
What is a SIP Mutual Fund?
SIP is a popular investment method where an individual invests a fixed amount regularly. You can choose this fixed amount (as low as Rs.10) and how regularly you want to invest, which can be weekly, monthly, quarterly, or annually.
One major reason for investing in SIP is the benefit of rupee cost averaging, which results in increased returns over time. This helps investors take part in the stock market without knowing how to time the market. In addition, it compels you to set aside a small sum separately, which makes investing a habit.
How do SIPs Work?
You can start a SIP for most open-ended mutual funds. You can choose the amount that you want to invest, and the sum will get auto-deducted from your bank account and invested in a mutual fund scheme. For instance, with *Navi Nifty 50 Mutual Fund, you can start a SIP with Rs.500 and invest in the top 50 companies of India.
*Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
For example, let’s say you have invested Rs.2000 via a monthly SIP and have set the 7th as the deduction date. This means that the amount will be automatically deducted from your bank account on the 7th of every month and auto-credits to the mutual fund.
If you continue investing small amounts in a scheme at regular intervals, you will end up accumulating a large sum of money, thanks to the power of compounding. That said, it’s essential that you stay invested for as long as you can to maximise your returns.
10 Best SIPs to Invest in 2023
Here are the 10 best mutual funds SIPs you can invest in:
| S No. | Best SIP Plans | Features | Expense Ratio | 3-year Annualised Returns | 5-year Annualised Returns |
| 1. | Navi Nifty Next 50 Index Fund – Growth | NAV: Rs.9.94 AUM: Rs.95.92 Cr | 0.12% | ||
| 2. | Canara Robeco Bluechip Equity Fund (Growth) | NAV: Rs.47.22 AUM: Rs.8832.26 Cr | 0.39% | 17.16% | 14.72% |
| 3. | HDFC Index S&P BSE Sensex Direct Plan Growth | NAV: Rs.564.24 AUM: Rs. 4214.10 Cr | 0.20% | 14.16% | 13.39% |
| 4. | Axis Bluechip Fund Direct-Growth | NAV: Rs.49.36 AUM: Rs.36,890.65 Cr | 0.55% | 11.84% | 12.95% |
| 5. | Mirae Asset Large Cap Fund Direct Plan-Growth | NAV: Rs.88.44 AUM: Rs. 35,406.83 Cr | 0.53% | 14.89% | 11.83% |
| 6. | ICICI Prudential Technology Fund Growth | NAV: Rs.145.89 AUM: Rs.9356.93 Cr | 0.89% | 32.86% | 24.32% |
| 7. | PGIM India Flexi Cap Fund Direct-Growth | NAV: Rs.28.74 AUM: Rs.5379.73 Cr | 0.31% | 24.45% | 15.40% |
| 8. | SBI Focused Equity Fund | NAV: Rs.252.30 AUM: Rs.28452.99 Cr | 0.70% | 15.42% | 11.86% |
| 9 | IDFC Nifty Fund | NAV: Rs.39.30 AUM: Rs.574.62 Cr | 0.10% | 15.24% | 12.84% |
| 10 | Quant Mid Cap Fund | NAV: Rs.148.65 AUM: Rs.1272.71 Cr | 0.63% | 37.91% | 2079% |
Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
Also Read
Types of SIP Plans
1. Flexible SIP
This type of SIP allows you to increase/decrease the periodic investment as per your needs. The amount is fixed when starting the investment but you can change it 7 days before paying the instalment.
2. Perpetual SIP
Regular SIPs have a start and an end date. However, perpetual SIPs do not have a defined time for the end date and continue the investment till you give specific instructions to stop it.
3. Top-Up SIP
With this, you can increase the existing SIP amount periodically. This facility is useful for when you start earning more and want to increase your investment.
Out of these, anyone could be the best SIP plan for you, depending upon your money and needs.
Is It Better to Invest in Mutual Funds via SIPs or Lump Sums?
Take a look at the following factors to find a better investment method:
1. No Need to Monitor Markets
Lump-sum investment is a bulk commitment. Therefore, investors need to watch market movements closely and invest when the prices are low. On the other hand, SIPs can benefit from different market cycles, so there is no need to time the market.
2. SIPs Require Low Investment Amount
The lower limit to invest in an SIP is Rs.100 while for lump sum investments this limit is around Rs.5000. This makes SIPs more suitable for salaried individuals.
3. SIPs Instill Financial Discipline
Investing an allocated amount every month in mutual funds through SIPs helps instil financial discipline. This helps build the habit of investing and reduces unnecessary spending.
4. Averaged Costs
As SIPs purchase differently in different market cycles, the cost of purchase gets averaged over the entire investment period. Lump-sum investments do not provide this benefit.
5. Power of Compounding
Investments via SIPs have a compounding effect which increases returns by reinvesting the interest amount back into the scheme. Also, the interest you earn through SIPs is reinvested in the scheme.
Lump-sum investments generate higher returns with a long-term investment horizon and are ideal for specific goals like creating a retirement fund. On the other hand, investing via SIPs is a good option for novice investors and helps to balance market fluctuations.
Unless you are a seasoned investor, investing in mutual funds through SIPs is your best bet.
The graph shown below shows the impact of beginning to invest Rs. 1000 monthly at different stages of life till the age of 60 years, which is assumed to be the retirement age. The rate of return is assumed to be 9% p.a.
If you start investing Rs. 1000 at the age of 30, as per the illustration, a corpus of approximately 27.14 can be generated and the amount invested over time would be 4.2 lakh. It also shows the impact of investing early.
Taxability of Investments Through SIPs
1. For Equity-Oriented Funds
This refers to mutual funds with 65% or more exposure to equity and equity-related investments. For these funds, you do not have to pay any tax if the holding period is greater than a year. However, for a holding period of less than a year, you are liable to pay STCG (short-term capital gains) tax amounting to 15% of your profits.
2. For Debt-Oriented Funds
This refers to all mutual funds with less than 65% exposure to equities. For a holding period of less than three years, capital gains are added to your income and taxed as per the applicable bracket. If the holding period is more than 3 years, you will have to pay taxes at a 20% rate after the benefit of indexation.
6 Reasons to Invest in Mutual Funds via SIPs
1. Power of Compounding
With an SIP plan, your account accumulates additional units depending on market rates. With each investment, the reinvested amount will increase, leading to growth in portfolio value. Hence, even with small investments over time, you can accumulate substantial wealth over the long term.
2. Benefit of Rupee Cost Averaging
When you invest a fixed amount of money on a fixed interval through SIP, you keep investing in it irrespective of the market situation. SIP mutual funds will ensure that you will buy lesser units when the markets are bullish and more units when the market shows bearish trends. Over long periods of time, this averages out the cost of purchasing and deals with market volatility.
3. Money is Not a Barrier
With a standard SIP starting at a nominal amount, usually below Rs.1,000, you can easily get started with investments without much financial strain.
4. Leads to Disciplined Investment
SIPs are automated; accordingly, investors do not have to remember to set aside money for investments. Since everyone is not an expert at managing money, this ensures the steady growth of your investments.
5. Ideal for New Investors
SIPs are low-risk instruments considering you have the option to start with a nominal amount. This is ideal for investors who’re just starting out.
6. Flexible options
You can stop your SIP investment at any time without needing approval from the fund manager. You can also pause your investment with a SIP Stop request in case of a financial crunch and resume your investment again whenever it is convenient. Funds can also be withdrawn at any time with a click and you can use them for emergency times.
Final Word
Systematic Investment Plans are ideal for growing your wealth for the future one step at a time. Choose the best SIP plans to take advantage of regular investments with reduced risks against market fluctuations. In addition, it is an easy and flexible way to grow your wealth without cost barriers.
By choosing funds such as the Navi Nifty 50 Index Fund you can start investing in India’s top companies via SIP with an amount as low as Rs.100.
*Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
FAQs
Ans: Yes. SIPs are suitable for new investors as they do not have to arrange for a large sum of money to get started in their investment journey.
Ans: All mutual funds come with various levels of risk; thus, the risks associated with a SIP will depend on the type of mutual fund. However, an SIP itself somewhat reduces the risk of market fluctuations owing to its rupee cost averaging feature.
Ans: There is no right time to start investing in an SIP. This is because existing market levels do not impact the long-term performance of an SIP investment.
Ans: An SIP instalment will stop if there is no balance in your bank account. A single missed payment does not lead to the cancellation of the SIP or any penalties. However, failure to pay for three consecutive months may lead to cancellation.
Ans: For most fund houses, six months is the minimum period of investment for SIPs. However, such short-term duration may lead to low returns due to market conditions. Investors might want to consider investing in one of the best SIP plans for as long as possible to get maximum returns.
Ans: Yes, SIPs are tax-saving instruments. Under Section 80C, you can claim a tax deduction of up to Rs. 1.5 lakh.
Ans: The minimum SIP amount you can invest is Rs. 100. There’s no cap on the maximum amount to invest in SIPs. However, for tax savings, the maximum amount eligible for investment is Rs. 1.5 lakh only.
Ans: Before deciding on the SIP most suitable for you, you need to understand your financial position. If you are a salaried employee, then you should go for monthly SIP as you get your salary on predetermined dates, which helps you invest regularly. You may consider investing through a weekly SIP if you want to purchase fund units more frequently and optimise the cost of purchase of fund units to the fullest.
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Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
