Best Mutual Funds for SIP in 2020 - Outside View by PersonalFN

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Best Mutual Funds for SIP in 2020
Jan 31, 2020

Are you among the many people who have resolved to make smart money practices to lead a healthy financial life and create wealth in this New Year?

If yes, then, you would agree that a disciplined approach to investing will take you far ahead in this journey.

Building a portfolio of the best mutual funds and investing through the SIP mode is one of the most efficient ways to do it.

Many times, investing a lump sum in mutual funds becomes a risky proposition. This is where Systematic Investment Plan (SIP) comes to the rescue. With SIP, you can invest on a daily basis, monthly basis, or on a quarterly basis in a mutual fund scheme of your choice. This investment amount can be as low as Rs 500 per month.

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SIP has made life easy -- it's lighter on the wallet, you don't need to time the market to generate wealth, you inculcate the habit of investing regularly, and it is an effective medium to accomplish vital financial goals such as, buying a dream home, children's education needs, their marriage, and your retirement, among others.

As it's said, "little drops of water make a mighty ocean"; SIP just does that. If you follow the right discipline and ensure that you do not miss or stop SIP instalment, it can help you achieve the envisioned financial goals.

Table: Top ranking schemes based on 3-year SIP return

Scheme Name SIP Lump Sum
1-year (%) 3-year (%) 5-year (%) 1-year (%) 3-year (%) 5-year (%)
Axis Bluechip Fund 21.23 16.63 15.53 21.94 19.62 11.34
IIFL Focused Equity Fund 30.06 16.1 15.2 32.74 14.63 11.82
Axis Focused 25 Fund 22.59 13.52 15.15 24.38 17.87 13.01
Axis Midcap Fund 19.89 13.43 13.39 19.24 17.35 10.84
SBI Focused Equity Fund 19.77 13.35 13.94 23.18 16.86 11.73
Canara Rob Bluechip Equity Fund 20.92 13.31 13.1 18.63 14.8 9.88
Axis Small Cap Fund 26.79 13.19 13.48 26.91 14.34 12.15
Sundaram Select Focus 16.89 12.16 12.58 17.53 15.57 8.75
Mirae Asset Emerging Bluechip 20.85 12.12 15.69 19.63 15.62 15.87
LIC MF Large Cap Fund 21.47 11.91 11.08 19.84 12.39 7.78
S&P BSE 500 - TRI 12.12 7.56 9.91 11.54 11.42 8.17
SIP returns are XIRR %, Lump sum returns are CAGR %
Data as on January 06, 2020
(Source: ACE MF)

*Please note, this table only represents the best performing Mutual Funds based solely on past returns and is NOT a recommendation. Mutual Fund investments are subject to market risks. Read all scheme related documents carefully. Past performance is not an indicator for future returns. The percentage returns shown are only for an indicative purpose. Speak to your investment advisor for further assistance before investing.

Out of the diversified equity schemes analysed, Axis Bluechip Fund, IIFL Focused Equity Fund, Axis Focused 25 Fund, Axis Midcap Fund, and SBI Focused Equity Fund stood as the top performers based on 3-year SIP returns. The top performing schemes delivered double-digit returns across period. As we can see in the table above, over the longer horizon of 5-years, SIP returns were higher than lump sum returns. This goes on to show that SIP is a worthy mode for your long-term goals.

Regular investment through SIP helps to average out the cost of investment and compound your wealth. Through the SIP mode, you can buy more units when the markets are low, so when the market bounces back, it results in higher returns. And if market volatility, such as the one we witnessed in the last couple of years, makes you wary, taking the SIP route would help you mitigate the risk.

But make sure that you select the best schemes that align with your financial goals, risk appetite and investment horizon. While equity investment have the potential to generate high returns, don't ignore the risk involved, and select funds that are most suited for you -- as per the asset allocation meant for you.

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Your equity SIP portfolio should contain a fair proportion of large-caps and mid-caps, as well as growth and value-styled schemes for optimum diversification. Pick funds using stringent rating parameters. Some schemes perform well over the shorter time horizon, but they may not necessarily generate higher returns over the long term. Therefore, select funds that perform well across market phases and cycles as compared to the benchmark and category peers.

[Read: The Special Care to Select the Best Mutual Funds in 2020]

Watch this short video on selecting mutual fund schemes:

At PersonalFN, we select and recommend mutual funds on quantitative and qualitative parameters using our S.M.A.R.T Score Matrix:

  • S - Systems and Processes
  • M - Market Cycle Performance
  • A - Asset Management Style
  • R - Risk-Reward Ratios
  • T - Performance Track Record

Editor's Note: If you wish to select worthy mutual fund schemes, I recommend you to subscribe to PersonalFN's unbiased premium research service, FundSelect.

Additionally, as a bonus, you get access to PersonalFN's popular debt mutual fund service, DebtSelect.

Each fund recommended under FundSelect goes through our stringent process, where they are tested on both quantitative as well as qualitative parameters.

Every month, PersonalFN's FundSelect service will provide you with insightful and practical guidance on equity mutual funds and debt schemes - the ones to Buy, Hold, or Sell.

If you are serious about investing in a rewarding mutual fund scheme, Subscribe now!

Author: Divya Grover

This article first appeared on PersonalFN here.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.


The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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