Top SIP Plans to Invest in 2024 for Strong Financial Future

Indians are gradually getting comfortable with the idea of gaining significant returns with small regular investments in mutual funds. This facility is popularly known as a systematic investment plan (SIP). As of June 2024, there 91.4% of retail investors in mutual funds. SIPs can be one of the prominent reasons for this participation.

However, selecting a suitable plan for investment is equally important to drive investment growth. Mutual funds have some attractive features, but making a suitable combination of these is crucial. Every investor has separate aspirations from their investments and after assessing them, one can plan their investment efficiently.

A similar stand is true for selecting a suitable SIP plan for mutual fund investment. Let’s learn more about the SIP facility and discover some of the best SIP plans for one-year investment in 2024.

What are Systematic Investment Plans (SIPs)?

Mutual funds seek to suit the capacity and investment objectives of mass people. In this process, systematic investment plans (SIP) have been transforming. Basically, it is a facility that allows investors to invest small amounts as low as ₹500 periodically. This period is usually monthly. 

Investors can also avail of the autopay facility, which deducts the SIP amount as per the decided period from the investor’s bank account. Apart from this, some of the crucial benefits of SIP are:

• Rupee cost averaging – The small investments over a period average out the cost for a particular investment. Also, it is possible due to the compounding effect. Over the period, the time value of money would decrease. However, mutual fund units will be purchased at equal intervals with SIP, and it will potentially help in lowering the final cost of investment. This phenomenon is known as rupee cost averaging.
• Starting early – As discussed before, the SIP amount is quite low. It makes the investment attractive and suitable for even the young investors who do not have large amounts for lumpsum investments. This can help them start disciplined investments early in life and avail the compounding benefit in the long term.
• Diversification and access – Mutual funds work on the logic of money pooling. It collects money from investors, pools it and invests in diverse instruments as per the fund category. Therefore, small investment amounts can help one gain access to instruments like equity shares, bonds, government securities, commodities, etc.

As of August 2024, there are 9.61 crores active SIP accounts in India. It can attract new investors to start their SIP investments. However, understanding its working is more important than directly making an investment. The SIP amount deposited by investors helps them earn mutual funds based on Net Asset Value (NAV). Therefore, there are several crucial aspects of it before making an investment.

To know more: SIP investment: Your path to wealth building

Understanding SIP investments with an example

Mr ABC is willing to start investment in a mutual fund for one year with a SIP of ₹500 per month. He invests in a large-cap equity fund. His investments will be processed as follows:

Month	NAV (in ₹)	Units	SIP amount deposited (in ₹)
1	2000	4.00	500
2	2125	4.25	500
3	2250	4.50	500
4	2200	4.40	500
5	2300	4.60	500
6	2250	4.50	500
Total		26.25	3000

Based on the NAV, the investment will be processed in the future. Finally, when an investor is willing to redeem (sell) the investment, his total units will be sold at NAV on that particular day.

You may also like: Maximising returns with Dollar-Cost Averaging

Best SIP plans in 2024 for 1 year investment

Selecting a suitable investment plan may require an assessment of different factors. However, we have curated a list of 5 best SIP plans for one year investment. This list is curated by considering the following factors:

Basis of selection

• 1-year return

These SIP investment options have generated potential 1-year returns historically compared to other options in a similar category. 

• Diversification

There are diverse mutual fund schemes in this list which have investments in equity, bonds, other debt instruments, etc. Diversification can potentially help investors balance their risk and return in the overall portfolio.

• Regular and direct plans

The list includes a combination of direct and regular plans which invest with Asset Management Companies (AMCs)directly or through distributors/brokers/bankers, respectively. 

• Growth option

The list has all the schemes with growth options because it helps investors retain the NAV growth rather than withdraw/receive as Income Distribution cum Capital Withdrawal (IDCW/dividend).

1. Quant Infrastructure Fund growth option (direct plan)

It is a type of thematic equity-oriented fund focusing on the infrastructure sector. The investment works on the VLRT framework (valuation, liquidity, risk appetite, time). Some of the key features of this fund are as follows:

• The benchmark for this index is Nifty Infrastructure TRI.
• The minimum amount for a SIP plan in this scheme is ₹1000.
• The scheme has high risk owing to its portfolio distribution which has major investment in reliance industries, followed by futures of Larsen and Toubro Ltd.
• Compared to its benchmark, the scheme has performed significantly in the past year, with nearly 35% returns as of September 30 2024.

2. Bank of India Small Cap growth option (regular plan)

This scheme primarily targets emerging companies with smaller market capitalisation. Its main aim is to seek capital growth by investing in equity and related securities of small enterprises. Key features include:

• Utilises the NIFTY Smallcap 250 index for performance tracking, aligning with companies that show potential in the small-cap space.
• Typically allocates 65% to 100% of assets into a broad portfolio of smaller firms, emphasising those with sustainable models and room for expansion. Currently, as of August 2024, the portfolio holds 84.16% small cap equities,
• Small caps come with higher risk. However, they also carry the potential for substantial gains over time.
• The scheme has generated nearly 49.02% 1-year returns as of October 1, 2024.

3. Aditya Birla Sun Life Credit Risk Fund growth option (direct plan)

Credit risk funds are unique investments which invest in only AA or below-rated corporate bonds. Due to this feature, they carry inherent risk factors, but they can provide potential diversification for the portfolio. This credit risk fund is managed by Aditya Birla Sun Life Mutual Funds. Some of the key features of these funds are:

• Its benchmark is the CRISIL Credit Risk B-II index, and it has generated significant returns of nearly 10.2% in the past year (as of September 30 2024).
• The scheme requires a monthly SIP of ₹100.
• The portfolio of this fund has major investment in debentures, followed by that in Government of India bonds and non-convertible debentures.
• With AUM of more than ₹900 crores as of October 1, 2024, the scheme is also prospective about investing in modern instruments like Real Estate Investment Trusts (REITs).
• The scheme’s performance compared to its benchmark is impressive.

4. Axis Floater Fund growth option (regular plan)

Floater funds are a unique investment avenue that invests minimum 65% of their assets in floating rate bonds. These bonds do not have a fixed interest rate but they change as per benchmarks such as repo rate. Some of the key features of these investments are as follows:

• Its benchmark index is the Nifty Long Duration Debt Index A-III.
• It requires a minimum of ₹1000 of SIP for investment.
• It is moderately risked as per the risk-o-metre.
• It has nearly 95% investment in fixed-income instruments with 90% in government backed securities and 5% in corporate debt as of September 2024.
• Over the period of one year, the regular plan has outperformed its benchmark with nearly 10.5% returns.

5. Motilal Oswal Flexicap Fund growth option (regular plan)

This mutual fund scheme is managed by Motilal Oswal AMC Ltd. and has been one of the top performers in the category, based on its one year returns. Some key features of this fund are as follows:

• Its benchmark is Nifty 500 Total Return Index (TRI).
• Flexi-cap fund provides a great mix of equity and other instruments with 65% of total investment in equity assets. It is a fund without restriction of investment in particular market capitalisation.
• The SIP starts at ₹500 per month.
• The scheme has generated nearly 62% 1- year returns as of October 1, 2024.
• Its portfolio has maximum allocation to information and technology-software sector.
• It charges 1% exit load for redemption before one year.
• Investing ₹500 monthly can provide investors following returns in one year.

Pros and cons of SIP investments

Pros	Cons
Rupee cost averaging and compounding are one of the crucial advantages of SIP	Mutual fund investments have market exposure which can create market risks for investors.
Disciplined investment can potentially reduce stress for investors	SIP may not suit for short term investment due to compounding rational
You can start with small amounts, modify, or pause contributions as needed.	You’re tied to a predetermined schedule, limiting flexibility to respond to market changes.
Reinvested gains enhance growth, building wealth over a longer period.	Returns are influenced by the fund manager’s strategies, which might not always align with market conditions.
Investments are diversified across different assets, reducing exposure to a single source of risk.	Early withdrawals may incur fees, and some funds have lock-in periods that limit liquidity.
Access to experienced managers who handle market analysis for you.	Expense ratios and fees can cut into your overall earnings, impacting long-term growth
Auto-deductions simplify the process, ensuring you invest without needing constant intervention	Automatic contributions might pressurise cash flow if financial situations change unexpectedly.

Also read: EMI vs SIP

Bottomline

SIPs provide a path to building wealth through disciplined, periodic investments. They allow access to diverse assets and leverage rupee cost averaging for potential growth. However, exposure to market fluctuations, fund manager strategies, and associated costs can affect overall outcomes. 

Assessing personal financial goals and risk tolerance is essential before opting for a plan. While they fit various portfolios, choosing wisely after understanding both the advantages and limitations is crucial for aligning with long-term objectives.

FAQs

1. What is SIP investment in mutual funds?

A SIP allows you to put in a fixed sum into a mutual fund at regular intervals, starting with as little as ₹500. Payments are automatically deducted from your bank account, usually every month. This method buys more units when prices drop and fewer when they rise, potentially balancing out costs. It’s an option for those looking to grow savings steadily without needing a large starting capital.

2. Is there any SIP for 1 year?

Yes, you can invest in SIPs for just one year. Many mutual funds offer this flexibility. You make regular contributions and then stop. It’s suitable for short-term goals, though returns may fluctuate with market movements. Always review the fund’s history and performance before choosing.

3. Is SIP 100% safe?

SIP is not completely without risk. SIPs involve mutual funds, which can be affected by market changes. The value of your money may fluctuate based on these movements. While this method reduces exposure by spreading out purchases, there is still uncertainty. Understand the potential downsides and select options that fit your comfort level. Always do your research first.

4. Can I invest ₹1000 per month in SIP?

Yes, you can. Many options let you contribute small sums regularly. Some even accept ₹500 as a starting point. The main idea is consistency. Pick a plan that matches your financial goals and research before committing.

5. Is SIP better than FD?

It really depends on your financial goals. SIPs can provide higher returns but come with uncertainties. Fixed deposits, on the other hand, are secure and offer fixed interest, though usually at a lower rate. Choose FDs for safety. Opt for SIPs if you seek potential long-term gains and can handle some ups and downs.