A systematic investment plan (SIP) is a process of investment, wherein the investors can make a systematic periodic investment in market-linked securities for a specific tenure. The investments can be made in small amount instead of lump-sum.
Invest ₹10k/month & Get Rs 1 Cr Tax free*
The investment can be made in the frequency of weekly, monthly, or quarterly. SIP helps to grow money through compounding interest, ensuring higher returns on maturity.
Systematic Investment Plan is commonly known as an SIP. In India, SIP plans allow you to invest a fixed amount in your favorite mutual fund schemes periodically to grow your SIP premium through compounding interest.
So here’s what is SIP in a nutshell: It is a smart, or rather hassle-free, mode of investing money in mutual funds, where you are allowed to contribute a pre-determined sum of money on a weekly, monthly, or quarterly basis.
*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
SIP mutual funds are flexible in nature, thus, investors can choose to decrease or increase the amount of investment, or stop investing in the plan whenever they want. SIP is the safest and best choice of investment for beginners and for those who are not well-versed in the mechanism of the financial market.
Here are best mutual fund schemes to invest through SIP in India
|SIP Plans||Type||3 Year||5 Year|
|Aditya Birla Sun Life Medium Term Plan||Debt Fund||8.39%||9.13%|
|Aditya Birla Sun Life Savings Fund||Debt Fund||7.53%||8.03%|
|Aditya Birla Sun Life Short Term Fund||Debt Fund||7.83%||8.37%|
|Axis Blue Chip Fund||Equity Fund||7.53%||5.92%|
|Axis Focused 25 Fund||Equity Fund||-9.74%||7.66%|
|Birla SL Balanced '95 Fund||Balanced Fund||9.42%||16.83%|
|Birla SL Equity Fund||Equity Fund||13.70%||21.78%|
|DSP BlackRock Midcap Fund||Equity Fund||16.77%||25.68%|
|DSP Equity Fund||Equity Fund||-9.97%||3.25%|
|DSP Strategic Bond Fund||Debt Fund||7.70%||8.10%|
|Edelweiss Large &Mid-cap Fund||Equity Fund||1.70%||2.90%|
|HDFC Balanced||Balanced Fund||10.65%||18.96%|
|HDFC Mid Cap Opportunities Fund||Equity Fund||14.84%||26.00%|
|HDFC Prudence Fund(G)||Balanced Fund||9.02%||16.56%|
|HDFC Small Cap Fund||Equity Fund||21.52%||24.31%|
|ICICI Prudential Balanced Advantage Fund||Balanced Fund||9.16%||14.39%|
|ICICI Prudential Equity & Debt Fund||Equity Fund||11.11%||17.48%|
|ICICI Prudential Value Discovery||Equity Fund||7.34%||21.25%|
|Kotak Standard Multicap Fund||Equity Fund||-1.28%||3.56%|
|L&T India Prudence Fund||Balanced Fund||10.03%||18.36%|
|L&T low Duration Fund||Debt Fund||6.12%||7.49%|
|Mirae Emerging Bluechip Fun||Equity Fund||1.80%||8.10%|
|Motilal Oswal Focused 25 Fund||Equity Fund||-8.25%||3.69%|
|Nippon India Low Duration Fund||Debt Fund||7.50%||7.73|
|Reliance Credit Risk Fund||Debt Fund||7.87%||8.33%|
|Reliance Liquid-Treasury Plan(G)||Debt Fund||6.82%||7.32%|
|SBI Bluechip Fund||Equity Fund||-3.94%||0.95%|
|SBI Magnum Balanced Fund||Balanced Fund||9.10%||17.27%|
|SBI Magnum Gilt Short Term||Debt Fund||8.78%||9.38%|
|SBI Small Cap Fund||Equity Fund||1.80%||8.40%|
|TATA Large &Mid-cap Fund||Equity Fund||-2.45%||1.00%|
Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer. Tax benefit is subject to changes in tax laws. *Standard T&C Apply
The route of SIP mutual fund allows you to efficiently manage your personal finances and build a financial corpus targeted at a safe financial future. Contributing to SIP ensures that you can manage your everyday finances, and that too without any hassle. However, the returns are totally subject to your fund choice. The above list of the best SIP plans in India to help you choose your ideal SIP investment.
Investing in SIP mutual fund is very simple and hassle-free. When you apply for one or more best SIP plans, your money is automatically debited from your bank account on a stipulated interval and invested in mutual funds you have purchased. Based on the NAV (Net Asset Value) of your funds, you are allocated a certain number of units at the end of the day. Every time you invest, you choose to invest in best SIP plan in India, and additional units are added to your account based on the current market rate.
The investors don’t require being an expert in the market timing to invest in the Stock Market. Units are purchased at different rates. When the prices are high, the investors buy more units, but when the prices are low, investors buy fewer units.
Two methods that greatly benefit the investors under even best SIP plans are – Rupee Cost Averaging and Power of Compounding.
The Stock markets in India are unpredictable. Hence, it is often difficult to understand what the best time to invest in is and what is not. Rupee-cost averaging helps investors get rid of this problem. It allows your invested money to earn less units when the price is high and more units when the price is low.
Let’s understand rupee-cost averaging with an example. Let’s assume you are investing Rs.500 each month between November 6, 2018 and October 5, 2019.
Now, check out the average cost per unit for investment. You’ll notice that it is lower than the average NAV of your investment over a period of 1 year.*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
Average Cost = Total Amount/Total Units = Rs.6000/21.64 = Rs. 277.27
Average Price = Sum of all NAVs/Investment Span = Rs.6757.8/12 = Rs. 563.15
As you can see the average cost is lesser than the average price per unit. This is how rupee-cost averaging helps you generate greater returns by buying the units on lower costs.
Please note: Aforementioned table and values are only provided for illustration purpose and shoul d not be correlated with performance of any SIP mutual fund scheme.*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
Whatever amount you invest in SIP mutual fund, you earn interest on it. Such interests get compounded and accumulated over a period of time. The longer the tenure is the higher the fund value would be. Therefore, if you stay invested for a longer period of time, you can accumulate more wealth with the power of compounding. Hence, if you start investing early in your life, you will create more wealth than one who comes in later.
Let’s understand the power of compounding using the table below. This table will help you understand how power of compounding helps you maximize your returns over a longer period.
|At end of Year||5%||10%||15%||20%|
Systematic Investment Plans (SIP) are of 4 types and a short description of each of these is given below:
SIP investment offers various benefits to investors. With a systematic investment plan, an individual can reap big returns by investing a small amount regularly. The following are the benefits of investing in SIP.
A Systematic Investment Plan (SIP), commonly called SIP, is a method of investment offered by mutual funds to its investors for disciplinary investment. SIP Mutual Fund facility allows its investor to make investment of a fixed sum at pre-defined and regular intervals in the chosen mutual fund plan.
A simple definition of what is SIP mutual fund is that it is a professionally managed fund, which pools investment from a large number of investors to invest in the capital asset. In such mutual funds, the capital collected by different investors is invested in purchasing companies stocks, shares or bonds. The professional fund managers collectively manage the mutual fund investment with an objective to create the highest possible returns on investment. SIP aids in growing money via compounding interest, ensuring higher rates of returns on maturity.
Let’s take a look at what is a SIP mutual fund in a gist.
Investing in SIP mutual fund is one of the most lucrative ways for wealth creation. However, it is very important to consider the expertise of the fund manager while choosing the fund.*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
SIP Investment Plan works on the concept of “Save First, Spend Next”. Through SIP investment, the investors can invest a fixed amount at a regular interval of time like weekly, monthly, or quarterly instead of doing one-time investment. Let’s take a look at the reasons, why you should invest through SIP?
Most of the time, the investors who are new to the market often get confused between SIP investment or one-time investment. However, to sort out their confusion, here we have briefly discussed both the investment option.
|One-time Investment||SIP Investment|
|In a one-time investment, the investors need to invest a lump-sum payment during the tenure of investment.||Sip investment includes period investment, where the investors can invest a fixed amount per month in the fund option of their choice.|
|The one-time investment earns better returns on investment at the time when the market performs high.||SIP investment earns better returns on investment at the time when the market performs low|
|The One-time investment can result in a loss at the time of market fluctuation.||With the benefit of rupee cost averaging SIP, investment helps to deal with the market crash|
The investors can get all the information related to various mutual funds online. However, before making an investment, certain aspects should be kept in mind.
The investment process in SIP mutual fund is very simple and hassle-free. Investors just need to keep in mind the below-mentioned points while investing in SIP.
Generally, investors pick funds based on their risk profile, investment tenure, and returns offered in the past 5 to 10 years. Although these aspects must be checked, there are several other aspects that need to be assessed as well, in order to avoid the loss of the capital in a market crash.
The following are 7 common mistakes investors make when investing in SIP:
Investing in SIP is considered as the most promising investment. Instead of keeping your money ideal in a savings bank account, you can invest in a SIP and take benefit of regular savings along with earned interest. However, the perks of investing in systematic investment plan do not stop right there. You can customize a SIP according to your requirements. In case you want to change your fund options or make some other desired changes, even the best SIP plan in India allows you to do so by following some simple steps as mentioned below:
Rough calculations or an approximate calculation can be dangerous when you are planning a particular financial goal to achieve. It is always best to make a foolproof financial plan and work with real numbers while operating towards your short-term or long-term financial objectives.
A systematic investment plan helps you achieve these goals sensibly by making you invest in a mutual fund scheme of your choice. And in return, it manages your investment portfolio. You can start investing even in best SIP plan in India with a minimum of Rs. 500. So, by investing even a minimum amount in SIP, you can fix a time period to achieve your goal.
Tax benefits are only applicable to the investments made in Equity Linked Savings Schemes (ELSS). If one invests in ELSS, government-approved tax saving scheme, they can claim tax deductions under section 80C of Income Tax Act, 1961.
A disciplined investment routine plays the most important role when aiming for high returns. Investing in mutual funds via an SIP helps maintain the regularity of the investments and helps the investors - attain their financial objectives.
Rupee-cost averaging allows investors to invest pre-determined amounts regularly, either quarterly or monthly. So, instead of investing a lump-sum, one can make gradual investments at particular intervals of time over a long period of time. Rupee cost averaging minimizes the need to study and time the market. During market fluctuations, the rupee cost averaging method allows the investors to achieve a lower average cost per unit.
SIP investment plans are a hassle-free mode of investment. One can issue instructions to banks to facilitate the option of auto-debits from the bank account. A SIP investment is an ideal investment option for retail investors who can’t go for active investments.
The most appropriate way to create wealth is to invest regularly and to start investing as early as possible. A small amount invested on a regular basis can ultimately double over a long period of time. With the benefit of the power of compounding, one can stay invested in the plan for a longer tenure and can create wealth in the long-term.
|Fund||3 Year Returns (%)|
|Birla SL Frontline Equity Fund(Growth)||23.15|
|SBI BlueChip Fund-Regular(Growth)||26.25|
|BNP Paribas Mid Cap Fund(Growth)||33.82|
|Mirae Asset India Opportunities Fund-Regular(Growth)||27.45|
|Franklin India Prima Plus Fund(Growth)||27.17|
*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
If you are planning to invest through an SIP and a have high to moderate risk appetite, you can invest in the five funds above. Before investing, always use a reliable SIP calculator to understand the probable return of your investment. However, if you are new in the field of investment, and have low-risk appetite, start with debt funds. Gradually, with experience, start investing in equities for a higher return on your investment.
SIP Calculator is an online tool, which enables you to calculate your SIP returns over a period of time even prior to starting your investment. SIP returns calculation is based on the principle of compound interest. You just need to enter the amount you wish to invest, select the investment tenure, and this tool will quickly calculate the returns for you. SIP Calculator is quite helpful for you to decide the amount you want to invest in mutual funds, as you may want to increase your investment amount for much higher returns in the future.