How to Start Investing in Mutual Funds Via SIPs?

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You can purchase additional units via SIP, regardless of the volatility in stock or bond markets. You can buy units at lower prices when markets fall during bearish phases. Units will be sold at higher prices in bullish markets. You will see that your average purchase price is lower than the market price if you add up your total investment cost. This will result in higher profits. This is called rupee cost averaging.

You can build wealth over time by investing in selected mutual funds and reach your financial goals.

What you need to do before starting a SIP in Mutual Funds

Like any other investment method, there are some things you must do before you start a SIP. These are:

Identifying financial goals

Your primary motivation for investing in mutual funds via a SIP is to achieve your goals. You could live a comfortable retirement, buy a house or car, or pursue higher education for your children and/or their marriage. These are all future goals that will have tangible future value. You can use either online tools or hire a professional financial advisor to calculate the future value of your retirement, taking into account inflation.

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Determine the time frame for your goals

Before you can start a SIP, it is important to determine the time frame for each goal. You can set short-term goals (less than three years), such as the down-payment on your car or the higher education for your children. Long-term objectives (more than ten years) could be your retirement.

The best asset allocation

Only after you have decided on the asset allocation (the amount to be invested in equity or debt), can you start your SIP. It should be at least 80% in debt and 20% equity for short-term goals. The recommended allocation for medium-term goals would be 60% equity and 40% debt. For long-term goals, 80% equity and 20% of debt would be the best ratio.

Deciding how much to invest

Your financial goals will determine how much you can invest in SIP. This can be done online or by a financial advisor.

How to choose the right mutual fund to invest in

Online portals will allow you to search for the best mutual funds that can be invested in via SIP.

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How to choose the investment mode

SIP can be initiated online or offline.

Ensure adequate funds are available in your account

It is important to choose which account you will pay the SIP payments from, and make sure there are enough funds so your SIP doesn’t stop.

Which are the best mutual funds to invest in through SIPs?

These are the best mutual funds for you to invest in, based on your time horizon.

Aditya Birla Frontline Equity Fund

This large-cap equity fund is one the best mutual funds to invest as it has earned annualised returns of 11.78% and 15.30% respectively in the 3-year and 5-year horizons. Annualised returns are 20.68% since its launch.

ICICI Pru Value Discovery Fund

This value-oriented equity fund, which invests in stocks with potential growth, has the highest 3-year, 5-year and 10-year returns. Annualized returns since launch are 20.18%.

HDFC Mid Cap Opportunities Fund

You can expect returns of 12.8%, 21.9% and 24.19% over the 3-, 5-, and 10-year periods. This fund is mid-cap and one of the most popular mutual funds. Annualized returns are 15.55% since the fund was launched.

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Principal Hybrid Equity Fund

This is one of the most popular mutual funds for medium-term financial goals. It has earned 11.23% annually since its inception. The 5-year, 3-year and 10-year returns are respectively 14.85%, 16.16% and 15.54%. This fund is hybrid aggressive.

L&T Hybrid Equity Fund

This aggressive hybrid fund is one of the most popular mutual funds. It has earned 12.54% annually since its launch. The returns over the 3- and 5-year periods are 9.37%, 16% respectively.

SBI Equity Hybrid Fund

This is one of the most popular balanced mutual funds. It offers returns of 10.6%, 15.67% and 16.09% over the 3-year, 5-year and 10-year periods. Annualized returns are 16% since inception.

Reliance Equity Hybrid Fund

This hybrid fund is one the best mutual funds you can invest in. Annualized returns since inception are 13.05%. The 3-year, 5-year and 10-year annualized returns are 9.68% and 15.69% respectively.

Axis Short-Term Fund

This is a short-duration mutual fund that you can invest in to achieve your short-term financial goals. Annualized returns since inception are 7.87%. The 3-year and 5-year returns were 7.24%, 7.97%, respectively.

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HDFC Short Term Debt Fond

It is one of the most popular mutual funds for short-term goals, with annualised returns of 7.54% and 8.35% for the 3-year and 5-year time frames. Annualized returns are 8.55% since its launch.

ICICI Pru Short Term Fund

The short-duration bond fund has a 8.01% annualized return since its inception. The 3-, 5-, and 10-year returns are respectively 7.54%, 8.44% and 7.99%.

Start a SIP today to realize your dreams

SIPs are the best way to invest mutual funds and achieve your short-term and long-term financial goals. A SIP allows you to reap the benefits of rupee cost-averaging, wealth creation and flexibility in payment.

Start a SIP and stay focused to make your dreams come true.