How to Identify the Right Mutual Fund SIP?

Mutual Fund SIP is a simple, flexible and non-complicated way to investing a fixed amount, regularly – weekly, monthly, quarterly etc – in the mutual fund(s) of your choice. The process is hassle free and can be conveniently handled by the bank that you are already banking with.

Working professionals, of all ages, can easily invest in a Systematic Investment Plan without worrying about being largely ignorant of the ways of the stock market. Every time you invest, certain units of equities are added into your account. Hence, even if the market faces a lull, you will be adding more units into your account with the fixed amount, thereby benefiting from Rupee Cost Averaging. Also, the SIP calculator helps you assess your future returns based on an approximate interest rate, giving you a clearer picture of what you are getting into.

So how do you invest in Mutual Funds SIP?

• First, a simple research on the internet will give you a substantial list of mutual funds in India that have had a healthy history over the years.
• But before finding the mutual fund of your choice and suiting, find the right Fund House that you trust enough to invest in. A Fund House that has substantial history in the market with a proven track record in returns is ideally the way to go.
• Once you have identified the Fund House, the mutual fund search can begin. Assuming you are not well-acquainted with the ways of the stock market, narrow your investment planning options using the CAGR(Compounded Annualised Growth Rate) that is published in the monthly factsheet on the website of the mutual funds. The CAGR is a valid manner in which the mutual funds’ growth history can be assessed.
• Another factor to look out for is the corpus size of the mutual fund. While there are plenty of good mutual funds across the spectrum of corpus sizes, having the bar at Rs 500Cr+ can simplify the process for a novice.
• Apart from the corpus size, the duration of existence of the mutual fund in the market is also something to lookout for. The longer it has had a presence in the market, the more you can trust your money with it.
• While looking at the history of the mutual fund, do not look at its past results in isolation. A scheme’s return must be compared against its benchmark return. Even if a scheme has generated a 9% annualised return, but has failed to beat its benchmark return, then it is not the best choice to go with.
• Also watch out for any major fund manager exits in the mutual fund house. If the fund manager has not been in the market for over 3 years, then it is best to not go with it.

But if you still find the process of researching for the right mutual fund complex, then simply contact the Relationship Manager in your bank and he/she will pull out a list of mutual funds that are ideal for you. The bank will also suggest you the best SIP Mutual Fund to invest in.