How to choose the best mutual fund SIP?

SIP mutual fund is a powerful and reliable way when it comes to converting your savings to investments, particularly for those who believe in building their respective portfolio, brick by brick with discipline and perseverance. There are various benefits of staying invested during the SIP period even if the markets are volatile. This essentially means that one should be very patient with their long-term mutual fund investments as that is going to take care of their financial goals. The return rate of continued SIPs without disruption, can deliver higher returns compared to the SIPs that are paused and restarted or stopped in between.

Having tools such as SIP calculator to facilitate the investment process, SIP mutual fund remains a user friendly, easily accessible and good method for beginner investors who want to kick start their journey in the world of mutual funds. Now, for a better understanding, let us see some tips and tricks for making a choice on the best SIP:

How to Choose the Best SIP?

Choosing the right mutual fund schemes for starting your SIP is imperative and here are a few points to remember before choosing one:

  1. Investment Objective: This becomes one of the most important factors as an investor needs to know what they are aiming for before starting the SIP investment. Factors such as duration – short term or long term, what is your risk profile (low, moderate or high) need to be considered before starting.
  • Fund type: As mutual funds are of various types, it is important to know which is suitable for your risk appetite. Let’s have a look at them:
  • Equity Mutual Funds –These are the most preferred choice for doing long term SIPs. They are further categorised into large cap, midcap, small cap and diversified equity mutual funds, etc. They are ideal if your risk profile is moderately high to high or very high.
  • Debt mutual Funds – These funds can be further classified based on your risk appetite and the investment tenure for which you want to  continue your SIP, you should choose an appropriate debt fund from corporate bond funds, credit risk funds, Gilt funds and banking or PSU funds among others. They are suitable for conservative to moderate investors.
  • ELSS Funds – SIP Investment in ELSS mutual fund schemes can be started if you want to save taxes under Section 80C. These are essentially diversified equity funds and suitable if your risk profile is moderately high to high.
  • Fund house – It is advisable to invest in a fund belonging to a reputed fund house, as that enhances the credibility of your investment.
  • Good rating – It is best to look for the funds that have good ranking or ratings accredited by platforms like CRISIL, Morningstar and Valueresearchonline. The funds with 4-5 star ratings can be considered for starting your SIP.  

Having understood these basic pointers to keep in mind when you invest in SIP, may help you go a long way in your wealth creation journey.  We should also highlight an important tool like SIP return calculator which helps you know the corpus that you can expect from your SIP after the chosen tenure. SIP is a popular method of making mutual fund investment and in this read, we made an analysis on the same. Having explored the best practices before choosing a SIP investment, it is safe to say that this is one of the best forms of making investment journey through mutual funds.