Best SIP Funds
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Best SIP Plans 2019 – Top SIP Mutual Funds to Invest

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1. What are Mutual Funds?

A mutual fund is formed when a professional pools money from various individuals and institutional investors to purchase government and corporate securities. The professional managing the pooled investment is called the fund manager. The funds are classified based on equity exposure. Mutual fund investments are diversified to offset risk and potential losses.

2. How Do Mutual Funds Work?

Mutual funds have a simple process of working. As an investor, you invest in a mutual fund company, which pools investments from other individuals having similar investment goals. The fund created is managed by a professional having a good track record and immense knowledge of the financial market. The objective of the fund management is to achieve growth through strategic investments. A certain number of fund units will be assigned based on the quantum of your investment. Asset Management Company (AMC) will manage your investment by investing in various schemes that are operated by the mutual fund. The mutual fund house also offers services such as financial consulting, advisory, customer service, marketing, accounting, and sales functions for the schemes.

3. What is SIP?

Systematic Investment Plan (SIP) is a smart tool for investing in mutual funds. SIPs make your mutual fund investments hassle-free and straightforward. You can start by investing a fixed sum at regular intervals, say weekly, monthly, or quarterly. This planned process of investing helps to inculcate financial discipline in the long run and also ensures a future of wealth building. It is particularly useful because of its flexible feature. The SIP amount is auto-debited from your bank account and invested in your mutual fund scheme. With each SIP you pay, additional units of the mutual funds are purchased at the prevailing Net Asset Value (NAV) and adds on to your account and profile. You get the benefit of Rupee Cost Averaging and the power of compounding.

4. How is SIP Better than Lump Sum?

SIP and lump sum are the two ways of investing in mutual funds. Both SIP and lump sum investments have their own set of merits and demerits. In the end, it all boils down to the financial goal of the investors. SIPs can be encouraged for all investors regardless of their age while lump sum investments are advisable only to those investors that are focused on wealth accumulation over time.

In a SIP, generally, the investors don’t need gains to reflect immediately but eventually overtime. SIP entails a fixed sum at regular intervals, regardless of what the market situation is, and investors tend to buy more units when the market plays low automatically. This leads to a lower average price translating to higher returns. With the lump sum investment, you are faced with the market at a particular cycle where the market rates may or may not be down. Having the advantage to invest at an average price over time makes SIP a better option. SIP is a saver option in volatile markets as you invest with no fear of the markets, in case of lump sum monitoring the market movements is utmost important.

5. Why Invest in Mutual Funds?

Investing in SIP is an excellent way of accomplishing your long-term and short-term financial goals. One of the significant reasons to invest in SIP is to build the habit of saving and investing. It helps in being financially disciplined. Also, it protects you from the market risks and cycles that might impact the fund portfolio to some extent.

6. Best SIP Funds in India

Following are some of the best SIP options. The funds shortlisted here are purely based on the 5-year annualised returns, as of July 2019. Remember, investing in mutual funds may be subjected to market risk and requires careful consideration before investing. ClearTax does not endorse any of the funds.

Best small cap funds

Scheme name

5-year annualised returns

Reliance Small Cap Fund – GrowthSmall-Cap Fund

13.75%

L&T Emerging Businesses Fund – Regular Plan – GrowthSmall-Cap Fund

13.22%

HDFC Small Cap Fund – GrowthSmall-Cap Fund

13.18%

DSP Small Cap Fund – Direct Plan – GrowthSmall-Cap Fund

13.17%

Axis Small Cap Fund – Growth

12.99%

Best debt funds

Scheme name

5-year annualised returns

Edelweiss Government Securities Fund – Regular Plan – GrowthGilt Fund

10.26%

DHFL Pramerica Dynamic Bond Fund – GrowthDynamic Bond Fund

9.60%

Reliance Income Fund – GrowthMedium to Long Duration Fund

8.90%

Aditya Birla Sun Life Floating Rate Fund – Regular Plan – GrowthFloater Fund

8.40%

Axis Banking & PSU Debt Fund – GrowthBanking and PSU Fund

8.35%

Best equity funds

Scheme name

5-year annualised returns

Mirae Asset Emerging Bluechip Fund – GrowthLarge & Mid-Cap Fund

18.63%

Franklin Build India Fund – GrowthSectoral/Thematic

14.31%

HDFC Small Cap Fund – GrowthSmall-Cap Fund

13.18%

Mirae Asset Large Cap Fund – Regular – GrowthLarge-Cap Fund

13.12%

Sundaram Rural and Consumption Fund – GrowthSectoral/Thematic

12.60%

Best hybrid funds

Scheme name

5-year annualised returns

Principal Hybrid Equity Fund – GrowthAggressive Hybrid Fund

10.43%

ICICI Prudential Regular Savings Fund – GrowthConservative Hybrid Fund

9.89%

UTI Arbitrage Fund – GrowthArbitrage Fund

6.57%

LIC MF Debt Hybrid Fund – GrowthConservative Hybrid Fund

6.51%