InvestmentYogi: Advises on the top mutual funds for SIP (Systematic Investment Plan) under categories like equity diversified, tax saving funds and balanced funds
There is a famous quote, “Drop by Drop forms the ocean.” Similarly, every paisa makes a rupee and each rupee invested in right product and at right time will help you to prosper in life. Systematic Investment Plan (SIP) develops a habit of regular savings from monthly income than investing this amount in various schemes of mutual funds after analyzing expected returns, risk, asset allocations, etc. Investing on regular basis i.e through SIP route has given better returns in long term compared to investing lump sum amount in any mutual fund schemes.
Example 1:
Mr. A, invested in various schemes of mutual funds through SIP from 1st Jan, 2007 to 31st Dec, 2009. We will compare the returns with non SIP return i.e. invested lump sum amount in those schemes. The returns from each scheme are given below:
| Scheme1: Reliance Equity Opportunities (Growth) |
| | Annualised SIP return | Annualised Non-SIP return |
| 3 Yrs | 21.88% | 8.78% |
| 1 Yr | 98.48% | 85.50% |
|
|
|
| Scheme 2: SBI Magnum Global (Growth) |
| | | |
| 3 Yrs | 15.96% | 2.18% |
| 1 Yr | 103.47% | 94.76% |
|
|
|
| Scheme 3: Franklin India Prima (Growth) |
| | | |
| 3 Yrs | 17.60% | 3.42% |
| 1 Yr | 96.40% | 86.61% |
| Source: | Value Research Online | |
Advantages of SIP:
Rupee cost averaging:
Investors have no need to time the market for their entry while investing. The investments get averaged out by investing through SIP on monthly or quarterly basis in MF schemes. It reduces the risk of investing when markets are volatile.
![clip_image001[1]](http://www.investmentyogi.com/blogs/mutualfundas/clip_image0011_thumb_63594813.gif "clip_image001[1]")
Power of compounding:
Investments early in life helps to get the benefit of compounding on invested amount in long term. So, thru SIP an investor can start investing nominal amount consider Rs 100, Rs 500 or Rs 1000 of his savings to get the benefits of compounding by investing in mutual funds.
![clip_image001[2]](http://www.investmentyogi.com/blogs/mutualfundas/clip_image0012_thumb_2F44A8C0.gif "clip_image001[2]")
Discipline:
Regular savings and investments are an easy way to build the corpus compare to investing a lump sum amount in one go.
![clip_image001[3]](http://www.investmentyogi.com/blogs/mutualfundas/clip_image0013_thumb_38513441.gif "clip_image001[3]")
Ease while investing:
You can choose the option of Auto debit/ECS while filling the SIP form of any monthly/quarterly date or give post dated cheques for the amount you wish to invest in MF schemes.
As, you now understand the concept and advantages of SIP. Let us now identify “Best Mutual Funds for SIP” in popular categories as follows:
Top ELSS Schemes for SIP
1. ICICI Prudential Tax Plan:
Objective: To generate long term capital appreciation from a portfolio that is invested predominantly in equity and provides tax benefits.
Top Sector Allocations: IT, Pharmaceuticals
| Absolute returns (%) |
| 5 Years | 3 Years | 1 Year |
| 144 | 41.8 | 53.7 |
2. HDFC Taxsaver:
Objective: To provide tax benefits along with capital appreciation.
Top Sector Allocations: Pharmaceuticals, IT, BFSI
| Absolute returns (%) |
| 5 Years | 3 Years | 1 Year |
| 179.4 | 38.8 | 48.7 |
3. Canara Robeco Equity Tax Saver:
Objective: To provide long term capital appreciation by predominantly investing in equities.
Top Sector Allocations: BFSI, Pharmaceuticals, Oil drilling and exploration, BFSI
| Absolute returns (%) |
| 5 Years | 3 Years | 1 Year |
| 255.4 | 59.5 | 43.9 |
4. Sahara Tax Gain:
Objective: To provide attractive returns, security and liquidity through Investments in capital and money markets.
Top Sector Allocations: Pharmaceuticals, BFSI
| Absolute returns (%) |
| 5 Years | 3 Years | 1 Year |
| 203.7 | 56.6 | 40.8 |
5. Franklin India Tax shield:
Objective: To provide medium to long term growth of capital along with income tax rebate.
Top Sector Allocations: BFSI, Pharmaceuticals, IT
| Absolute returns (%) |
| 5 Years | 3 Years | 1 Year |
| 158.9 | 35.8 | 32.8 |
Source: Value Research Online
Note: The absolute returns calculated above are till 30th June, 2010.
Top Equity Diversified mutual funds for SIP
1. Reliance Equity Opportunities:
Objective:
Primary: To generate capital appreciation;
Secondary: Generate consistent returns by investing in debt and money market securities.
Top Sector Allocations: BFSI, Pharmaceuticals, IT
| Absolute returns (%) |
| 5 Years | 3 Years | 1 Year |
| 208.1 | 40.7 | 61.71 |
2. ICICI Prudential Discovery:
Objective: To generate returns through a combination of dividend income and capital appreciation by investing primarily in a well-diversified portfolio of value stocks.
Top Sector Allocations: BFSI, Pharma, Power, Telecom
| Absolute returns (%) |
| 5 Years | 3 Years | 1 Year |
| 199.9 | 57.7 | 65.74 |
3. Birla Sun Life MNC:
Objective: To build a high quality growth oriented portfolio to achieve long term capital appreciation through investment in multinational companies.
Top Sector Allocations: Pharmaceuticals, Service, BFSI
| Absolute returns (%) |
| 5 Years | 3 Years | 1 Year |
| 167.1 | 53.5 | 65.77 |
4. UTI Master Value:
Objective: Providing substantial long term capital appreciation from investment in undervalued stocks and good dividend yield.
Top Sector Allocations: Pharmaceuticals, Refineries, BFSI, etc.
| Absolute returns (%) |
| 5 Years | 3 Years | 1 Year |
| 147.9 | 55.5 | 70.11 |
5. HDFC Top 200:
Objective: To generate long term capital appreciation by investing in a portfolio of equities and equity linked instruments drawn from the BSE 200 Index.
Top Sector Allocations: BFSI, Oil drilling and exploration, BFSI, IT, Pharmaceuticals
| Absolute returns (%) |
| 5 Years | 3 Years | 1 Year |
| 239.4 | 60.4 | 35.4 |
Source: Value Research Online
Note: The absolute returns calculated above are till 30th June, 2010.
Best Balanced Funds for SIP
1. HDFC Prudence:
Objective: The investment objective of the Scheme is to provide periodic returns and capital appreciation over a long period of time, from a judicious mix of equity and debt investments, with the aim to prevent/minimise any capital erosion.
Top Sector Allocations: BFSI, Pharmaceuticals, Oil drilling and exploration
| Absolute returns (%) |
| 5 years | 3 years | 1 year |
| 203.1 | 56.1 | 44.8 |
2. Tata Balanced:
Objective: To invest in equity and debt oriented securities so as to give investors balanced returns.
Top Sector Allocations: BFSI, IT
| Absolute returns (%) |
| 5 Years | 3 Years | 1 Year |
| 158.2 | 40.7 | 33.9 |
3. Canara Robeco Balance:
Objective: To provide medium to long term growth of capital and also to distribute income by investing in equities, fixed income securities, other debt instruments and money market instruments etc.
Top Sector Allocations: Power
| Absolute returns (%) |
| 5 Years | 3 Years | 1 Year |
| 177 | 46 | 31.6 |
4. DSP Blackrock Balanced:
Objective: To generate long term capital appreciation and current income from a portfolio constituting equity and equity related securities as well as fixed income securities.
Top Sector Allocations: BFSI, Pharmaceuticals
| Absolute returns (%) |
| 5 Years | 3 Years | 1 Year |
| 171.8 | 42.8 | 31.3 |
5. Birla Sun Life 95:
Objective: Long term growth and income, through a portfolio with a target allocation of 60% equity, 40% debt and money market securities.
Top Sector Allocations: BFSI
| Absolute returns (%) |
| 5 Years | 3 Years | 1 Year |
| 164.2 | 45.1 | 30.7 |
Source: Value Research Online
Note: The absolute returns calculated above are till 30th June, 2010.
The above discussed mutual funds category are the most popular among investors. You can also invest in sector oriented mutual fund schemes through SIP. Each scheme has minimum SIP amount in the range of Rs 100 to Rs 10,000 specified in Key Information Memorandum. There is no maximum limit to invest through SIP in any MF scheme.
Absolute returns, annualized returns and objective of the schemes are not the only criteria an investor should consider while investing. Also, there are various risks involved while investing in mutual funds which need to be analyzed before investing and while reviewing, in order to get advantage of good returns by investing in mutual funds for long term.
Written for InvestmentYogi by Hiral Thanawala. Send us your feedback at yogi@investmentyogi.com
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InvestmentYogi: Leading website for research on the best mutual funds for SIP (Systematic Investment Plan) under categories like equity diversified, tax saving funds and balanced funds in 2010.