Which SIP is Best in India – How to Start Investing in India as a Beginner?

BLOG | April 11, 2024

You may have this question in mind about which SIP is the best in India. Before that, let’s start with – What you should know about SIPs?

SIP or Systematic Investment Plan is one of the most preferred investment methods today. The flexibility an SIP offers to investors is what makes it stand out and even allows newbie investors, with smaller ticket sizes, to get on the investment bandwagon.

What is a Systematic Investment Plan (SIP)?

SIP is a systematic and regular method of investing in mutual funds. Before checking which SIP is the best in India, you should also know that a Systematic Investment Plan allows an investor to invest a fixed amount regularly in a mutual fund scheme, eliminating the need to worry about the market conditions before investing. Here is a complete guide to understanding and investing in mutual funds. 

An SIP enforces a disciplined approach towards investing and infuses regular saving habits. It is quite similar to an investment in a recurring deposit (RD) with a bank, where you deposit a fixed sum of money into your recurring deposit account monthly. The main difference here is that your money is invested in a mutual fund scheme (equity schemes and/or debt schemes) and not in a bank deposit, and hence the investments (in mutual funds) are subject to market risk.

Why should I Invest in SIPs?

Well, in order to understand which SIP is the best in India and why, you should know a few things beforehand. For an individual investor, SIPs are often the easiest and most convenient way to go about saving for your future and income tax saving. Not only does it add a sense of financial discipline to your life, but also helps you invest regularly without having to worry about the state of the market, index levels, etc.

For instance, if you need to put a fixed amount in a bank RD, or even a mutual fund scheme, you need to devote time and effort to do it. You might have doubts about the market conditions or might want to invest more if you have a surplus lying around. SIPs put an end to all of these predicaments. The money is automatically invested regularly, without any effort on your part.

Top 5 Benefits of Systematic Investment Plan (SIPs)

What makes having a SIP worth it? Why should I invest my precious money in a particular SIP? Even after carefully considering everything else, how can I be sure which SIP is the best in India and will help me grow my money? Here are the top 5 benefits of SIPs you need to know:

1. Not too heavy on your wallet

Investing in a SIP enables you to invest small amounts at regular intervals. You can invest daily, monthly, and even quarterly. By reducing the burden of investing a lump sum, you allow yourself to save more by regularly investing even if it is a smaller amount.

2. Start small, save big

If you cannot invest Rs. 5,000 in one shot then that’s not a huge stumbling block. You can simply take the SIP route and trigger the mutual fund investment with as low as Rs. 500 per month.

3. Rupee-cost averaging

Rupee-cost averaging allows you to balance out the average cost of your investment. When other investors are getting cautious and exiting the market, a SIP infuses discipline within you that makes you commit cash at market lows, and helps you maximize the return on your investment.

4. Power of compounding often called “The 8th Wonder”

When you invest over a long period and earn returns on the returns earned by your investment, your money would start compounding and you’d get the benefits of the power of compounding. This helps you to build a large corpus that helps you in achieving your long-term financial goals with regular small investments.

5. Plan long-term goals with SIPs

You can effectively achieve your financial goals by enrolling for SIPs. The earlier you start the better it is. Many investors seek to invest in equity markets to make short-term gains and achieve their goals and ignore equity as a means for long-term wealth creation.

How much money do I need to start an SIP?

We will help you in understanding which SIP is the best in India but before that, you should know that the minimum amount you invest can range anywhere from Rs.500 to Rs.1,000 depending on the scheme you want to invest in. The upper limit could be anything you want but your SIP amount should ideally depend upon the time frame for which you want to invest and the amount you wish to have at the end of that tenure. You should also factor in the SIP frequency – weekly, monthly, quarterly or half-yearly.

Types of SIPs

To suit the needs of investors, Mutual Funds have evolved to offer different types of SIPs. You should know about these 4 types of Systematic Investment Plans before searching about which SIP is the best in India:

1. Top-up SIP

Top-up SIPs allow you to increase your SIP amount at regular intervals. This enables you to take advantage of a mutual fund scheme that is performing well by increasing the amount of your contribution at regular intervals. Also, it facilitates the investor to invest a higher amount with a rise in his/her income.

2. Flexible SIP

A Flexible SIP provides the facility to increase or decrease the SIP amount as per the cash flow of the investor. So, when an investor faces a cash crunch due to some reasons, he can skip payment of a few SIP installments till the financial situation returns to normal.

3. Perpetual SIP

Normally an investor signs up the SIP mandate for a fixed period of say, 1 year, 3 years, 5 years and so on, but if the investor does not enter the end date in the SIP mandate, it is deemed to be a perpetual SIP. This leaves the option open for the investor to redeem the fund at the time of his choosing or when his financial goals are achieved.

4. Trigger SIP

Trigger SIP is suitable for those with some knowledge and awareness of financial markets. An investor can set either an index level, NAV, event or a particular date to start this SIP. But this type of SIP is not desirable as it encourages speculation.

How to select the Best Mutual Fund for my SIPs?

When considering which mutual funds will be the best pick for investing, there are multiple points to look at. Based only on the careful selection of these funds, can we determine which SIP is the best in India. Trust us, picking funds is not as simple as checking the fund rating online and investing. The fact remains that blindly trusting a star rating is not going to give you a complete picture, and especially, it will not be in alignment with your financial plans and goals.

This is why while one fund might be perfect for one investor, it might be completely useless for another, regardless of its performance. These are the various factors you must consider before you search which SIP is the best in India:

1. Past performance

The past performance of a fund is important, but it is not everything since it can change in the future, and hence should not be the only factor for picking a mutual fund. Performance is a big heading that also has several different components to be considered.:

  • Comparison: In order to truly judge the performance of a fund, a prospective investor must compare the fund with its benchmark index and peers. 
  • Time period: For an SIP, it is important that investors have a long-term horizon (at least 3-5 years) to invest in equity funds. Hence, the long-term performance of the fund also becomes extremely important. 
  • Returns & Risk: Returns are one of the most important parameters that signify the value of a firm. Another important factor to be considered is the risk parameter. Ideally, the higher the risk, the higher the returns. For SIP, investors should seek investment in funds that offer moderately high returns with a moderately high risk. 
  • Portfolio concentration: One should aim to have a balanced portfolio of stocks, bonds and debt funds to better allocate risks and earn standard results. 

2. Fund Management

The performance of the mutual fund is also highly dependent upon the people who manage the fund, especially the fund manager and the team.

3. Costs of fund management

There are multiple costs associated while managing a mutual fund, namely expense ratio, entry load, exit load, etc. An investor should especially keep in mind the expense ratio while picking a mutual fund to invest in. Also, the exit load is a fraction of your NAV, and you should keep a note while picking a mutual fund.

Direct Fund vs Regular Fund

An important debate that plagues the minds of avid investors is whether to pick a direct plan or a regular plan. An investor who is looking to make high returns over the long run should opt for the ‘direct plan’ since it can generate roughly anywhere between 0.5-1% higher returns, owing to the lower expense ratio.

However, by opting for the direct plan, you will not be able to avail the services of a distributor, agent, relationship manager, and hence your research becomes important.

What are the Best SIP Plans?

Finally coming down to THE question, “Which SIP is the best in India?” So, the simplest answer to it would be that it depends on a set of circumstances. There is no one scheme that works for all, here. You must understand by now that SIPs are a medium to invest in mutual funds, hence there is no one-word, be all end all answer to the question ‘What is the best SIP?’ as there is nothing like a ‘best SIP’.

The thing that makes your Systematic Investment Plan the best for you is to optimize it in a way that works best for you. This means doing proper research for your financial goals, and ensuring that the funds that you are investing in align with your investment requirements and investment horizon. So, now you know that there is no specific answer to a question like – Which SIP is the best in India?

SIP vs Bank RD

This is a question that many people have in their minds when they are mulling over starting an investment in SIP. They have a question of whether an SIP is different and better than a bank Recurring Deposit account. By now you must have understood that there is no particular answer to a question like which SIP is the best in India. Everything depends on a person’s financial goals.

Bank RDs and post-office schemes used to be good saving options earlier because the rate of interest was high in the old days. However, now the interest rates on fixed deposits and recurring deposits are at a multi-year low.

And besides, mutual funds SIPs offer multiple merits over RDs and are new and promising investment avenues. Young investors are turning to SIPs because it helps them achieve many of their financial goals such as, buying a car, home, saving for their child’s future education, etc.

SIPs offer merits and benefits such as:

  • Diversification
  • Management by professional investors
  • Low cost of entering
  • High Liquidity
  • Economies of scale.

When it comes to benefits, not specifically talking about which SIP is the best in India, there are also multiple other benefits that SIPs provide over Recurring Deposits, such as:

  1. Benefits on Income Tax Saving
  2. A better risk-return trade-off
  3. Helps mitigate market volatility
  4. No penalties for missing SIPs installment

Even though RDs and SIPs both help inculcate the habit of discipline and regular savings in you, before you choose between the two, you must keep into account your long-term financial well being, where merits like tax-efficient and inflation-adjusted returns help you achieve those goals.

How to start an SIP investment?

Now that you understand the mechanics behind which SIP is the best in India for someone and why, here comes another question, how does one actually start SIP investment? Turns out you have only two options: offline and online.

If you choose offline, you’ve got a long road ahead of you. You have to:

  1. Select a mutual scheme that is best suited to your needs and investment objectives.
  2. Fill common application form/SIP form carefully
  3. Provide NACH Mandate and fill out all your SIP Details
  4. If KYC is not done, fill in the KYC form and get KYC verification done.
  5. Hand over the forms manually and to the RTA/AMC.

If you choose to do the SIP online:

You just have to do one simple thing, download the Sqrrl App and then follow the on-screen instructions. The benefit of doing an online SIP is that the process with Sqrrl is completely paperless and swift.

Our app is designed to help all people invest, regardless of whether you have an intricate knowledge of mutual funds or not. Setting up SIPs, or setting up a future investment like planning a vacation, retirement fund, etc. can be done with Sqrrl in minutes.

And don’t you just take our word for it, we’ve got little demos of the app here. You can go through them and tell us what you think. We also hope that you are clear about your preferences when you need an answer to the question-  “Which SIP is the best in India?”.

Download Sqrrl from the Apple App Store & Google Play Store and start SIPs

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