What is a sip? It is a method of investing in mutual funds. If you are planning to invest for a duration of six months then you can start your SIP in debt funds instead of equity. It solves two purposes in an investor’s portfolio – firstly with diversification, it helps in reducing the overall risk. Both new and experienced investors can start a SIP in debt funds.
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The debt portion offers stability when the equity markets fall.
Secondly, they make a good alternative to your bank savings account. If you want to save the surplus amount let’s say for six months then you can look for SIP plans in low duration funds and ultra-short duration funds. This way you can reach your short term goals like buying a gift, two-wheeler, vacations, etc.
But before you start your SIP in debt funds you need to be sure of your risk appetite and the investment horizon. Listed below are the two preferred fund categories for six-month SIP investment:
Here are some of the best SIP plans that are designed with such a short-term investment perspective:
They are open-ended debt schemes that are ideal for investors having a short-term goal of three to six months, who can handle market volatilities in order to get higher returns.
Basically, these are debt funds, which invest in fixed-income instruments for a shorter duration of up to six months. They are low-risk funds owing to a shorter span of investments but slightly higher risk than liquid funds. The investment is nearly at a zero risk of loss of the opted duration is more than 3 months. With Ultra-short Duration Funds, you can expect slightly higher or similar returns as your Bank fixed deposits.
Here are some of the best sip plans for ultra-short duration funds:
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If you do not want much risk in your investment and are looking for a short-term investment then you can consider SIP in low duration funds. Their maturity duration is higher than ultra-short term funds and liquid funds. It is suitable for risk-averse investors who can earn better returns in comparison to bank Savings Account in such a short-duration.
The focus of the fund manager is more on managing the duration in order to maximize the returns. So, the fund manager selects a relatively higher duration when the interest rates are in the downward trend and this helps in maximizing capital gains from the rising bond prices. One the other hand, when the interest rates are rising, protection is provided against capital losses in the portfolio by minimizing the duration of the fund.
The returns offered by low duration funds are usually steady and stable. However, the returns offered vary from one plan to another. We have shortlisted some of the best SIP Plans in low duration funds in 2020-2021:
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If you are still in two minds about keeping your extra money in your bank savings account or starting an SIP for six months, then SIP makes sense if you are ready to take some market risk. To achieve any of your short-term goals or to take up that vacation, you can definitely consider any of the above-mentioned best sip plans for six months in either low duration or ultra-short duration funds.
Now that you know the fund category you can start your SIP for a short-duration in any of the above listed plans. However, you can consider other SIP plans from different fund houses also. But before investing make an informed choice on the basis of NAV, Fund size, average returns, Expense ratio, and Crisil rating.
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