1. Finance

How to choose the best mutual funds SIP

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Mutual funds have become a popular mode of investment over the last decade. Investors can be seen spending a lot of time on an SIP calculator to plan their financial goals. The availability of many types of mutual funds in India leaves the investors spoilt for choices. There is a type of mutual fund available for every individual, every risk appetite, every goal and every time horizon. To choose the best mutual fund for starting an SIP is quite a daunting task. What you can do instead is to focus on your own risk profile, which will make the search for an ideal mutual fund so much easier. Once you zero in on the type of mutual fund you want to invest in, then settling in for an SIP amount becomes easier using an SIP calculator.


Therefore, in this article, we will talk about how to determine the ideal type of mutual fund for you to invest in instead of focusing on the best types of mutual funds in India.


  1. Financial goals: The first step towards determining the ideal mutual fund to invest in is to start with the ‘why’? The question you should ask yourself is “Why am I investing?” The answer to this question is your financial goals. For example, if your goal is to create a large corpus then the way forward would be investment into equity based mutual funds. The calculation put forth by the SIP calculator will give you an understanding of the amount of SIP you would need to invest to reach that corpus. On the other hand, if you want to get a fixed income from your investments then you should think of debt mutual funds. Apart from this there are goal based mutual funds like retirement funds, child education funds, tax saving funds, and gift plans.
  2. Risk Appetite: How much risk you are ready to take with your investment will determine the types of mutual fund in India suitable for your requirement. As a general rule of thumb, higher the risk you can take, higher are the returns. For example, equity funds have historically been able to beat inflation. On the other hand, debt funds give you the assurance of fixed income. Then there is a mix of both debt and equity available in the hybrid funds. If you are a first-time investor and are not able to spend much time on researching funds but still want equity exposure, then you have the option to invest in index funds which replicate a market index.
  3. Investment horizon:  The time you can remain invested is an important consideration while choosing the types of mutual funds in India for your investment. Remember that the longer you remain invested with your SIP will help you build a larger corpus. So for goals like retirement planning, your focus should be on building wealth through equity funds in the initial stages and then after you build a sizable corpus you can switch to a fixed income fund for capital protection. A balanced fund can help you beat market volatility with some equity growth as well.


Once you have understood your own profile, then you can start looking at the historical performance, the rolling returns of a mutual fund scheme as well as the fund house and fund managers track record. Your mutual fund distributor could help you in determining the ideal mutual fund as per your profile. Then you can get help of an SIP calculator to figure out how much you should invest and what would be the future value of your investments. Make sure that you remain disciplined in your investments to reap the benefits of compounding returns.


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