Which type of mutual fund is best for SIP?

SIP or Systematic Investment Plan is one of the two mediums of investing in mutual funds. You can invest a lump sum in the chosen mutual fund scheme or use the SIP mode. In the SIP mode, a specified amount is deducted from an authorized bank account and invested in the mutual fund scheme of your choice. SIP investments can be weekly, monthly, and in some cases, even quarterly.

SIP investment in mutual funds offers several advantages. It reduces the burden of bulk investment and helps to create a saving discipline. Further, due to the rupee cost averaging method and power of compounding, SIP investments help accumulate a significantly large corpus at a low investment cost.

If you are looking to invest in mutual funds through the SIP mode, here are some of the best options:

1. TATA Digital India Fund Direct Plan-Growth: Available on a minimum SIP investment of Rs. 5,000, the TATA Digital India Fund Direct Plan-Growth is a wise investment choice. This is a sectoral mutual fund with primary investments in the information and technology sector, which is one of the top-performing sectors in the country. This mutual fund is also adequately diversified across large-cap, mid-cap, and small-cap stocks. This type of mutual fund investment through the SIP mode is suitable for investors who have advanced knowledge about the market trends and can take a high risk to generate best-in-class returns. The five-year average returns of this fund are between 32-33%.
2. ICICI Prudential Technology Fund Direct Plan-Growth: This is another top-performing sectoral fund you can consider for SIP investment. The fund primarily invests in securities of companies operating in the technology sector. The fund considers the S&P BSE Information Technology index as its standard benchmark. The average five-year returns of this mutual fund are between 32-33%. However, there is a high concentration risk since the portfolio is not optimally diversified.
3. Axis Bluechip Fund-Growth: This is an open-ended equity mutual fund scheme that majorly invests in equity and equity-related securities of large-cap companies, including derivatives. This mutual fund predominantly invests in large companies, which are frequently traded. This improves the liquidity of these funds and makes them less volatile to market fluctuations. The Axis Bluechip fund has consistently performed well in the long term, delivering five-year returns between 17-18%.
4. Kotak Bluechip Fund-Growth: This open-ended equity mutual fund scheme invests in leading companies with large market capitalization across different sectors. This strategy improves the chances of the fund offering inflation-beating returns in the long run. The average five-year returns of the Kotak Bluechip Fund are between 15-16%. The scheme identifies relatively stable companies as per their financial strength, management strategies, reputation, etc., which helps lower the risk involved.
5. TATA India Tax Saving Fund: This open-ended equity-linked mutual fund is for investors who want high returns and tax advantages. The scheme invests a maximum share of your corpus in equity and related securities to maximize long-term returns. The portfolio selection is made per different parameters, such as capital efficiency, growth potential, liquidity, valuation, and governance. The average five-year return for this mutual fundscheme is between 13-14%. Investments in this mutual fund scheme are eligible for tax advantages under Section 80C.

Conclusion

In all, pick mutual fund investments that align with your goals, risk tolerance, and investment horizon. Use the Tata Capital Moneyfy app to find the right mutual funds. You can also use the Moneyfy app to monitor the performance of your mutual funds and ensure they align with your expectations.