Expert Picks: Best SIP Mutual Funds to Invest in for Wealth Creation in 2024

Small investments make up a big chunk of the financial markets, and these are mainly made into Mutual Funds through SIPs. FY2022-23 witnessed a surge in SIP investments, despite being a challenging financial year rife with constant market volatility arising from multiple global factors (war in Ukraine, High Inflation, Crypto Crash). If we look at the latest numbers, inflows into the mutual fund industry via systematic investment plans or SIPs reached Rs 1.56 lakh crore in 2022-23, up 25% from the previous year, indicating retail investors’ trust in the route despite market volatility. In comparison, figures from the Association of Mutual Funds in India (AMFI) showed an inflow of Rs 1.24 lakh crore through the method in 2021-22 and Rs 96,080 crore in 2020-2021.

If you are looking to renew your SIP investments, review your SIP portfolio, or just want to start investments in mutual funds through SIPs, this detailed guide will provide you with a list of the best SIP for 2024. Keep in mind that investing in Mutual Funds carries an element of risk, which varies from one fund type to the other. However, as we will see in later sections, investing via SIP can help offset some of this risk, as well as provide some additional benefits to you.

So, without further foreshadowing, let us briefly discuss SIPs to set the context before diving into the best SIP plans in India to invest in for 2024.

What is SIP Investment?

Let us first define a SIP for readers who are new to investing in mutual funds.

The Systematic Investment Plan (SIP) is a type of investment in which the investor selects a mutual fund that appeals to them and invests a set amount of money in that mutual fund on a regular basis. Instead of investing a large sum of money all at once, a Systematic Investment Plan makes incremental investments over time. The fund company determines the minimum SIP amount. All you have to do is select your desired SIP amount, link your bank account, and begin investing. SIPs instill financial discipline in investors and are seen as an appropriate investing strategy for new investors.

The Systematic Investment Plan is a great method of investing that allows you to invest anywhere from a small quantity to a large sum, depending on your tastes, needs, and financial goals.

Mutual funds typically provide SIP, lump sum, or both investment options. The option to contribute in small amounts each month through a Systematic Investment Plan (SIP) is one of the most tempting characteristics of mutual funds. SIPs in mutual funds offer both diversity and rupee cost averaging.

A List of the Top SIP Plans for 2024

How Does SIP Work?

SIP purchases mutual fund units at specified intervals depending on their Net asset value, or NAV. These SIP units will continue to accumulate until your investment period ends. The value of these units is credited to your account when you redeem them.

Assume you have invested Rs.2000 through a monthly SIP and have set the 9th as the deduction date. This implies that the money is automatically taken from your bank account on the seventh of every month and credited to the mutual fund.

Because of the power of compounding, if you continue to invest small amounts in a SIP plan at regular intervals, you will end up collecting a large quantity of money. Keep in mind to maximise your returns while investing in top SIP mutual funds that, you must stay invested for as long as possible.

What are the Types of SIP?

1. Flexible SIP Plans

This sort of SIP plan allows you to adjust the periodic investment to meet your demands. The amount is fixed when you begin the investment; however, you can adjust it up to 7 days before the installment is due.

2. Perpetual SIP

Regular SIP plans have a beginning and an ending date. However, perpetual SIPs do not have an end date and will continue to invest until you give specific instructions to stop it.

3. Top-Up SIP

You can use this to increase the existing SIP amount on a regular basis. When you start earning a higher amount and want to increase your investment, this facility comes in handy. Depending on your budget and needs, any of them could be the perfect SIP plan for you.

4. Trigger SIP

This sort of SIP is appropriate for inexperienced investors. It enables investors to specify the NAV, index level, start and termination dates. However, this type of SIP breeds speculation and is frequently discouraged.

How to select the best out of the best Mutual Funds for SIP Investment?

The following criteria must be considered while investing in mutual funds via SIP:

1) Determine Your Needs

You can invest in SIPs based on your needs, and you can begin a SIP by depositing a small amount each month in a mutual fund. Rather than making a large lump sum commitment, try to make small monthly investments to relieve the financial burden.

With the advent of the internet and widely accessible information, it is now possible to research the best mutual funds to invest in 2024.

2) Maintain a separate SIP for each respective goal.

Individuals may have many goals, and having different SIPs for each strategy will help you assess your investment more effectively.

Determine the best investment strategy for a specific goal and consider investing in the appropriate section of mutual funds based on your timeframe.

3) Increase Your Investments in Relation to Your Personal Risk Tolerance

Your risk appetite is the amount of risk you are willing to face while investing in a given type of asset.

Every investor has a different amount of risk tolerance, which is influenced by a variety of criteria such as discretionary income, investing horizon, and other requirements.

4) Evaluate the Portfolio’s Performance After a Few Years.

Your mutual fund SIP portfolio should be evaluated on a regular basis. This should be done every three or four years to assist you in eliminating underperformers and improving the returns on your portfolio.

A detailed look at the Best Mutual Funds For SIP Plans in 2024

Before proceeding, please remember that the data was obtained from the respective AMC websites on February 28, 2024. Past results are no guarantee of future results.

1. Quantum Tax Saving Fund Direct-Growth

If you are looking for a tax saving SIP, this is the fund for you. Quantum Tax Saving Fund Direct-Growth is an ELSS mutual fund scheme offered by Quantum Mutual Fund. This fund has been in operation for 14 years and 4 months, having been established on December 10, 2008. As of 31/03/2024, Quantum Tax Saving Fund Direct-Growth has assets under management (AUM) of 117 Crores.

The Quantum Tax Saving Fund’s ability to provide consistent returns is comparable to those of most funds in its category. As this is an ELSS fund, it will have a 3-year lock-in period but will also give tax benefits under Section 80C. This tax saving SIP is suitable for those seeking long-term growth and wealth creation, in addition to yearly tax benefits.

2. PGIM India Flexi Cap Fund Direct-Growth

This mutual fund by PGIM India is one of the finest mutual funds for SIP investments since it invests 89.48% in domestic equities, 42.84% in Large Cap shares, 14.41% in Mid Cap stocks, and 11.06% in Small Cap stocks. Furthermore, the Fund has 0.2% in government securities and 0.2% in debt. This fund is a suitable choice for investors who intend to hold their money for at least three to four years.

3. HDFC Index S&P BSE Sensex Direct Plan-Growth

Investors seeking returns comparable to the NIFTY 50 should consider the HDFC Index S&P BSE Sensex. This fund’s assets are invested in domestic equities to the tune of 100.02%, with Large Cap stocks accounting for 86.95% of the total.

4. Axis Bluechip Fund Direct-Growth

This is a direct investment fund that invests 7.41% of its assets in domestic equities, with 72.2% being Large Cap companies and 3.08% being Mid-Cap stocks. It is also engaged in debt (0.81%), with 0.81% in government securities. Suitable for long-term investors seeking excellent returns on their investments. Given the details below, it is one of the best SIPs to invest in.

5. Mirae Asset Large Cap Fund Direct Plan

This large cap fund aims to blend the stability of large caps with a few conviction ideas from mid-caps and other small caps. The investment approach focuses on investing in high-quality firms at a low cost and holding them for an extended period of time. The plan aims to discover companies with a long-term competitive advantage, such as equities with significant pricing power and sector leadership.

6. ICICI Prudential Technology Fund Growth

ICICI Prudential Technology Limited The fund allocates 92.6% of its assets to domestic equities, with 77.52% allocated to Large Cap stocks, 5.12% allocated to Mid Cap stocks, and 5.43% allocated to Small Cap stocks. The fund owns 0.16% of debt and 0.16% of government securities. Appropriate for fortification Investors with advanced macrotrend understanding who seek to make targeted bets for higher returns than other Equity funds.

7. Canara Robeco Bluechip Equity Fund (Growth)

Another good fund to invest in through SIPs is Canara Robeco Bluechip Equity Fund. The investment aim of this fund is to promote capital appreciation by predominantly investing in firms having substantial market capitalization. It is a large-cap fund that invests 96.05% of its assets in domestic equities, with 73.88% in large-cap stocks and 6.78% in mid-cap stocks.

8. SBI Focused Equity Fund

SBI Focused Equity Fund is appropriate for investors with an in-depth understanding of macrotrends and a willingness to put specific bets for higher returns than other Equity funds. The fund invests 87.33% of its portfolio in domestic equities, with 44.27% allocated to large-cap stocks, 21.18% allocated to mid-cap stocks, and 4.88% allocated to small-cap stocks.

9. IDFC Nifty 50 Index Fund

IDFC Nifty Fund offers two plans: Regular Plan and Direct Plan, which share a portfolio but have different NAVs. For growth and income distribution, each plan offers a cumulative capital withdrawal option. The index funds can be distributed using the capital of investors (Equalisation Reserve), which is a fraction of the sale price that represents realised gains.

10. Quant Mid Cap Fund

Quant Mid Cap Fund’s assets are invested in domestic equities to the tune of 95.51%, with 24.51% in Large Cap companies, 45.67% in Mid Cap equities, and 11.37% in Small Cap stocks. Long-term investors seeking large profits should consider this investment.

Where does a SIP Returns Calculator come into the picture?

A mutual fund SIP calculator is a valuable online tool that will assist you in calculating the returns on your SIP investment based on expected rates of return and future evaluation of investment after a specified time period. There are numerous mutual fund SIP calculators available online for this purpose.

Using a SIP returns calculator online to calculate your returns is always a smart idea because it will help you decide on the best mutual fund investment while also helping you plan for future financial goals. Keep in mind, however, that a SIP calculator can only estimate your returns. Actual returns are determined by a variety of factors, including market moves and volatility, tenure, fund performance, and so on.

How Does a SIP Calculator Work?

While you don’t need to do the calculations by hand because you can always find a monthly SIP calculator online, understanding where these numbers come from is always a good idea so you feel more confident in your investment strategy.

Monthly SIP calculators use the following SIP formula:

FV = P x {[(1 + r)n – 1] ÷ r} x (1 + r)

Here:

For example, if you wish to compute the FV for a SIP with ₹1,000 monthly contributions for two years and a 12% projected rate of return, the formula would look like this:

FV = 1000 x {[(1 + 0.01)24 – 1] ÷ 0.01} x (1 + 0.01)

It is worth noting that the r is 0.01 since our estimated rate of return is 12% per year, which equates to 1% every month.

A SIP investment calculator can help you do this calculation at the click of a button and give a rough idea of what you can expect from your investment amount. Thus, a SIP investment calculator is a valuable tool for every investor, rookie and seasoned.

What are the benefits of investing in SIP?

The following are the primary advantages of investing via SIP:

• You can start a SIP with a small amount of money: SIPs can start with as little as Rs.100, making it a great option to make your first investment. It also allows you to spread the risk over time rather than investing all at once.

• Automated investment promotes discipline: Once set up, the amount is regularly withdrawn from your bank account and invested in a mutual fund scheme of your choice. This reduces the need for manual involvement in the investment process.

• No need to time the market: Because this is a monthly automatic investment, there is no need to time the market. Investment occurs regardless of market conditions, and money is invested in regular payments and at various pricing levels, which aids in cost reduction. As a result, you do not need to be concerned about the market’s ups and downs.

• SIPs offer total flexibility: SIPs offer total flexibility in terms of the investment amount, choice of monthly or quarterly investing, and investment tenure. Furthermore, you can skip an installment and cancel or modify your SIP at any time. The SIP investment method has no lock-in periods. Only Tax Saving Mutual Funds have a three-year lock-in term, not other MFs.
• SIPs offer the advantage of rupee cost averaging: In the case of SIPs, you continue to invest regardless of market conditions. This assures that if the market declines, you can buy more units for the same amount of money. Naturally, as prices rise, the same amount will buy fewer units. This is known as rupee cost averaging. Because it smoothes out ups and downs, this helps to reduce market volatility.

The averaging effect works better over time since bear and bull market conditions (positive and negative market scenarios) can endure for lengthy periods of time–even years at times.

Averaging rupee costs is more likely to work in the long run. To get the most rewards, you must sustain your SIPs for the long term.

• SIPs can help you build wealth with little amounts: Systematic Investment Plans (SIP) enable you to invest a certain amount of money on a monthly basis that grows in line with market performance. Here comes the power of compounding into play! It refers to the procedure of reinvestment of returns’ at the same rate year after year in order to grow the main amount.

Simply put, it is “earning income on income” or “return on returns + principal.”

So, in essence, the money you have invested works for you to grow your investment corpus and assist you in meeting your financial objectives.

• Expert advice: Compounding operates in an exponential fashion over time. As a result, the longer you stay invested, the bigger your returns will be due to the power of compounding.

Taxability of SIP

SIPs are, without a doubt, the greatest way to invest in Mutual Funds, but understanding the tax implications is equally crucial before making your first contribution. However, the tax implications of various types of mutual fund schemes vary.

Although all gains you accumulate from Mutual Fund investments are classified as Capital Gains, they are further subdivided into Short-Term Capital Gains and Long-Term Capital Gains based on the fund type and the investment length.

When stock fund units are held for more than a year, the gains created are taxed as Long Term Capital Gain (LTCG). If the holding term is less than 12 months, the gains are termed Short-Term Capital Gains.

To qualify for LTCG taxes, debt fund units must be held for a period of more than 36 months. Otherwise, the units are subject to Short-Term Capital Gain (STCG) taxation.

Equity-Oriented Mutual Fund Taxation:

• Every fiscal year, long-term capital gains (LTCG) are tax-free up to Rs.1 lakh.
• Long-term capital gains above Rs.1 lakh per year are taxed at a flat 10% rate.
• Short-Term Capital Gains are taxed at 15%.

Debt Mutual Fund Taxation:

• Long-Term Capital Gains (LTCG) are taxed at a rate of 20% with indexation.
• Short-Term Capital Gains are taxed per the investor’s tax bracket.

Is SIP better than FD?

SIPs and Fixed Deposits have different investing aims, yet both allow you to diversify your portfolio while earning returns. SIP is a mutual fund investing technique in which investors can also invest in other funds. Predetermined deposits, on the other hand, are bank deposits that comprise a lump sum investment at a predetermined rate of interest for a given length of time; fixed deposit duration is flexible. It might last anywhere from 7 days to 10 years.

SIPs are mutual fund investments that are constantly vulnerable to market volatility. Fixed deposits, on the other hand, offer assured returns, making them an ideal choice for investors looking for less hazardous investments. Fixed deposits have a lock-in period, whereas SIPs have high liquidity because the investment is open-ended, and you can redeem your assets at any moment without influencing the market value, and there is no charge to stop a SIP.

Fixed deposit returns are extremely low when compared to SIP returns. Assume you have invested Rs.1 lakh in an FD with a maturity period of 5 years and an interest rate of 8%. You would receive Rs.1.48 lakh at maturity. Assume you have invested Rs.1500 per month in equity index funds through SIPs for the same time period as the FD. However, equity mutual funds possess the potential to provide returns in excess of 20%. If we assume a 20% return, the entire value of your investment after five years is Rs.1.71 lakh.

However, mutual funds are subject to varying market volatility, and you may not receive the expected returns. As an investor, you should keep some money in FDs for protection while also investing in SIPs to earn returns that outperform inflation. It is also feasible to reduce mutual fund investment risks by investing for the long term.

Conclusion

Hopefully, you will find this list of the Best Mutual Funds for SIP in 2024 helpful. A Systematic Investment Plan can be initiated at any moment to minimise risk by picking the suitable scheme plan for the investor based on their risk-return profile.

The investor must select a scheme that would assist them in meeting their long-term aims as well as their financial objectives.

Disclaimer: Mutual fund scheme investments are subject to market risks; thoroughly read all offer materials.

FAQs

1. Which SIP is suitable for a one-year investment horizon?

For those looking to invest for up to three years, it’s recommended to opt for Debt Funds when doing a SIP. However, Ultra Short Duration Funds could be a good alternative for a one-year investment period.

2. Can I withdraw from a SIP anytime?

Yes, you can stop your SIP at any time and withdraw your investment, either in part or in full. However, tax-saving funds like ELSS have a lock-in period of three years, which means you can only withdraw your investment after that period.

3. Should I invest in a lump sum or through SIP?

Investing through SIP helps to spread out your investments over time, which reduces the risk of investing all your money at once, especially when the market is at an all-time high. However, you can invest a lump sum when there’s a significant market correction, such as the one in March 2020. In short, start a SIP and add lump-sum investments whenever there’s a sharp correction.

4. What happens when you cancel a SIP?

When you cancel a mutual fund SIP, your bank account will stop being debited, but the money you’ve already invested will continue to generate returns in the fund. There’s no penalty for canceling a SIP, except for tax-saving funds, which have a lock-in period.

5. Is SIP a good option for long-term investing?

Definitely, by investing through SIP, you become a disciplined investor, and regular investments help you deal with market volatility. When the markets go down, you can buy more units for the same investment amount, which brings down your average cost. As markets rebound, you can expect higher returns due to this lower cost.

6. What is the average return on SIP?

SIP is not an investment tool in itself but a mode of investing in mutual funds. Therefore, the average returns on SIP will depend on the performance of the mutual fund scheme you choose.

7. What happens if we cancel the SIP?

When you terminate your mutual fund SIPs, the deductions from your bank account will cease, and the mutual fund company will not impose any penalties. The amount you have already invested will remain invested in the fund and continue to earn returns, and you can withdraw some or all of it at any time. However, if you withdraw before the minimum investment period has elapsed, you may be subject to an exit load fee. It’s important to review the mutual fund scheme’s terms and conditions before investing to avoid any confusion.

8. How to invest in SIP?

To invest in SIP, follow these steps:

• Choose a mutual fund that fits your investment goals and risk tolerance.
• Open trading (Demat) account with a registered stockbroker.
• Connect your bank and trading accounts.
• Create a SIP mandate through the mutual fund house or the broker’s platform.
• Choose the quantity and frequency of your investments.
• Your SIP deposit will be debited from your bank account automatically and invested in the mutual fund plan of your choice.

9.      Which mutual fund is best for SIP?

The best mutual fund for SIP depends on your investment objectives, your risk tolerance, and investment horizon.