5 Tips for Selecting the Top SIP Plan

By allowing investors to invest in mutual funds with utmost convenience and flexibility, SIPs or Systematic Investment Plans are now highly preferred by investors. While the SIPs surely offer several benefits, investors, especially the new ones, often find it difficult to select a top SIP plan. This post will talk about five excellent tips that can help you select the best plan as per your investment goals and time horizon. 

Managing your finances on your own is something that is easier said than done, especially if you have recently started focusing on mutual funds. However, Systematic Investment Plans, popularly known as SIPs have made things a lot easier for the investors. With almost negligible restrictions with respect to the amount you want to invest, when you want to invest and where you want to invest, SIPs are one of the best ways to invest in mutual funds. 

 

While SIP is an excellent way to flexibly and conveniently invest in mutual funds on a consistent basis, a major problem for the investors is to select the right SIP plan. Thus, to help you help, we have created a list of 5 important tips. 

1.       Your investment goal

No matter how good the mutual fund is that you have selected for your investment, it is of no use if you do not have an investment goal. Right from wealth creation, tax saving, buying a car, a house, or children’s education or marriage, make sure that you know how much money you’ll be required to invest to achieve that goal, how many years do you need, etc. before you select the top SIP plan. 

2.       The type of investor you are

It is also very important to understand what type of investor you are. If you are conservative, it is better to stick to debt-based funds which offer considerable returns with minimum risk. And if you are an aggressive investor with a long time horizon, equity-based funds can be ideal for you. If you are new to mutual funds, it is better to start with a reputed debt-based fund from a good fund house. Once you know how the funds work, you can then try investing in equity funds. 

3.       Reputation of the fund house

There are several fund houses in India which offer many different types of mutual funds. Needless to say, not all fund houses are created equal. There are many that have excellent reputation and experience, and there are also a few who that quickly made their mark in the industry. Search for the fund house, their experience, reviews of other investors, etc. before making the decision.

4.       Fund manager and the management team

It will be the fund manager who will be taking care of your investment. They will manage the asset and adjust them according to the situation. The management team should be experienced, and the managers should have been through at least a few business cycles. The managers who have not witnessed down market can be highly myopic whereas the ones who have seen a lot of slow markets can be very pessimistic. So, try to look for a good blend in the management team. 

5.       Performance of the fund

Once you have checked the factors mentioned above, now is the time to check the performance of the fund. It is not necessary that a fund which is a top performer now will continue to perform in a similar fashion in future too. Similarly, a fund that has not been able to perform for the past few months might not continue to underperform in future too. Look for a fund that has been able to perform consistently for the past few years rather than the current performance or the performance of the past few years. 

Use these tips when selecting a SIP plan and you should be able to select a fund which matches your investment style and objective and might provide you with excellent returns.