Due to declining bank rates and rallying equity markets, many investors have resorted to searching for the best SIP to invest now in mutual funds. A systematic investment plan (SIP) is a mode of investment wherein you could invest a fixed amount in a chosen mutual fund scheme periodically at fixed intervals – say daily, weekly, monthly or quarterly.
The contribution from SIPs went up to Rs.9155 crores in June 2021 up from Rs.8818 crore in May as per data from AMFI. The number of new investors has doubled in the last four years. The number of SIP accounts has breached the Rs.4 crore mark signaling increasing investor confidence in mutual funds.
As per data from AMFI, in June, for every SIP stopped almost 3 new SIPs were launched, where a total of 21.3 lakh fresh SIPs were launched.
SIP is one of the best way to invest in equity mutual funds. Equity mutual funds are volatile, however, in the long term, they have the potential to offer you risk-adjusted returns and form the generally best way to invest by SIP is to invest for 5 years or more. Midcap funds have got the highest inflows of Rs.1729 crores in June. The equity funds inflow was reduced to Rs. 5,988 crore in June 2021, down from Rs 10,082 crore in May. This could be due to the sharp run-up in equities despite fundamentals signaling a contrasting picture such as fiscal deficits, rising inflation and delayed recovery.
Investors are also seeing the importance of allocating to fixed income to reduce the market fluctuations seen in equities. You can also start an SIP in fixed income options such as debt mutual funds. This category saw net inflows of Rs 3,566 crore in June 2021 against outflows of Rs 44,512 crore in May.
Investors who think market valuations are looking high and are looking to balance their portfolio can use hybrid funds or Multi-Asset Fund of Funds as among to start the SIP. Among hybrid funds, arbitrage funds and dynamic asset allocation funds saw inflows of Rs. 9059 crore and Rs. 2056 crore respectively. The objective of hybrid funds is to assess the market conditions and valuation models and dynamically allocate the portfolio between equities and fixed income. Gold Funds recorded inflows of Rs. 359 crore in June. There are Gold Fund of Funds wherein you can invest using an SIP route.
However, irrespective of the plan chosen, an SIP offers several benefits such as suitability for any wallet; the SIP installment amount could be as low as Rs 500 per month. It also negates the necessity for timing the market as offers rupee cost averaging, which essentially means it buys low when the markets are high and high when the markets are low.
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