sip in mutual funds

What is SIP in a mutual fund? All you need to know

A Systematic Investment Plan (SIP) in Mutual Funds allows investors to invest a specified sum of money periodically, once a month or every other quarter. Like a recurring deposit, the monthly amount can be as low as INR 500. It’s practical since you can direct your bank to deduct the money monthly. 

SIP has gone mainstream amongst Indian mutual fund investors because it allows them to invest in a disciplined way without dealing with economic uncertainty.

Mutual Funds’ Systematic Investment Plans are by far the most popular way to get started in the realm of long-term investing. Starting SIP in Mutual Fund helps you stay invested for a long.  

SIPs are similar to recurrent deposits in which you invest a small/fixed sum each month. In India, Mutual Fund SIP accounts totaled 5.55 crores, with a total sum generated through SIP of 12,276 crores in June 2022. 

The following are the monthly amounts of SIP Contributions received from FY 2016-17 onwards:

SIP contribution in INR crore
The following are the details of new SIPs registered and canceled during FY 22-23
SIP in mutual funds

How long should a SIP last? 

Staying invested as long as possible is key to good returns. If you participate in a SIP for four years, your chance of loss is minimal. It’s also important to keep in mind that short time periods have more chances of loss and outside profit. In overextended historical periods, the good and terrible times balance out. 

The asset allocation of SIP investment 

Asset allocation is a critical component of SIP investment. The stock market performance determines the returns earned by equity-associated mutual funds. Therefore, if the market is not providing an attractive yield, your fund will deliver modest returns.

For good returns, try to dynamically distribute your assets – ideally combine long-term, mid-term, and short-term investments. You can diversify your SIP investments based on your risk tolerance and investment objectives, and not restrict your investments to just one kind of investment.  

When to withdraw? 

This has been the most frequently posed question among investors. The appropriate response is entirely dependent on the success of your fund. Monitor the mutual fund performance in which you have invested.

If the fund has a poor performance for even less than a year, it could be subject to market swings, but if the commission has been poor for much more than eighteen months, explore different investments. 

Nevertheless, this is not the only criterion to consider when evaluating a fund’s performance; you need also consider the mix of firms in which the fund has invested and their potential profitability.

Another effective method is to compare the performance of your mutual fund to that of identical mutual fund schemes. 

Benefits of Investing through SIP 

  • Simple Investment: You may begin investing as little as Rs 500 per month through SIP and see it increase. A SIP is not only easy to track, but it also allows you to save more money. 
  • Average Rupee Cost: The Rupee Cost Averaging component of SIP is unique because you buy more units when the market is low and more negligible when the demand is high. Hence you can buy more during every market downturn, lowering your investment cost and increasing your returns. 
  • Higher returns: SIP delivers twice the returns of regular investments or recurring deposits. This might assist you in avoiding excessive prices. 
  • Compound growth: SIPs work on the theory of getting a compound rate of return on your investments a moderate amount spent over time yields higher returns than a sizeable one-time commitment. 
  • Flexibility: SIP allows you to avoid long-term obligations such as building a portfolio such as Public Provident Funds or Unit Linked Insurance Plans. 

The best SIP funds 

Investing with a SIP allows you to spread your investments over time and benefits from rupee cost averaging. If you opt to invest in mutual funds through a SIP, you do not have to pace the markets. As per ICICI Direct below list is suitable for investments.


Top 10 equity mutual funds 

As per data from clear tax ( table below displays the top-performing equities mutual funds over the previous three and five years.

top 10 mutual funds

Who should make SIP investments? 

Everyone, from students to salaried workers, can start a SIP and invest in their chosen Mutual Funds with as little as Rs. 100 by using this strategy.

This is ideal for those with a consistent income stream. Individuals can invest a portion of their regular income in mutual funds by initiating a SIP. 

Each mutual fund is designed to attain a certain goal. Select the fund that best meets your objectives and risk tolerance brings you closer to your financial goals.

As a note to the investors, before initiating a SIP into a fund, examine the needs and align them with the fund’s objectives. Do a thorough analysis of the funds to make the most of your investments!

Consult an expert advisor to get the right plan for you

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