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Planning For It!

Best Mutual Funds for SIP in 2012

 

 

There is a famous quote, “Drop by Drop forms the ocean.” Similarly, every paisa makes a rupee and each rupee invested in right product and at right time will help you to prosper in life. Systematic Investment Plan (SIP) develops a habit of regular savings from monthly income than investing this amount in various schemes of mutual funds after analyzing expected returns, risk, asset allocations, etc. Investing on regular basis i.e. through SIP route has given better returns in long term compared to investing lump sum amount in any mutual fund schemes.


Example

Assume, Miss. Aanchal Jajoo had invested in various schemes of mutual funds through SIP from 1st Jan, 2007 to 31st Dec, 2009. We will compare the returns with non SIP return i.e. invested lump sum amount in those schemes.

The returns from each scheme are given below:

Scheme1: Reliance Equity Opportunities (Growth)

 

Annualised SIP return

Annualised Non-SIP return

3 Yrs

21.88%

8.78%

1 Yr

98.48%

85.50%

Scheme 2: SBI Magnum Global (Growth)

 

 

 

3 Yrs

15.96%

2.18%

1 Yr

103.47%

94.76%

Scheme 3: Franklin India Prima (Growth)

 

 

 

3 Yrs

17.60%

3.42%

1 Yr

96.40%

86.61%

Source:

Morningstar

 

 

 

Advantages of SIP

 

* Rupee cost averaging

Investors have no need to time the market for their entry while investing. The investments get averaged out by investing through SIP on monthly or quarterly basis in MF schemes. It reduces the risk of investing when markets are volatile.

 

* Power of compounding

Investments early in life helps to get the benefit of compounding on invested amount in long term. So, thru SIP an investor can start investing nominal amount consider Rs 100, Rs 500 or Rs 1000 of his savings to get the benefits of compounding by investing in mutual funds.

 

* Discipline

Regular savings and investments are an easy way to build the corpus compare to investing a lump sum amount in one go.

 

* Ease while investing

You can choose the option of Auto debit/ECS while filling the SIP form of any monthly/quarterly date or give post dated cheques for the amount you wish to invest in MF schemes.

As, you now understand the concept and advantages of SIP. Let us now identify “Best Mutual Funds for SIP” in popular categories as follows:

Top ELSS Schemes for SIP

 

 

      Total Return (Annualized) in %
Scheme Name Benchmark Index *Fund Size (Rs Crore) 1 yr 3 yr 5 yr Total Expense ratio (%)
Religare Tax Plan(G) BSE 100 120.4 10.9 9.5 7.8 2.5
Canara Robeco Equity Tax Saver(D) BSE 100 456.1 4.7 14.8 10.9 2.3
Fidility Tax Advantage Fund (G) BSE 100 1166.2 9.3 9.2 6.1 2
Franklin India Taxshield Fund (G) S&P CNX 500 853.3 11.4 10.6 5.8 2.1
HDFC Taxsaver Fund (G) S&P CNX 500 3223.7 9.9 8.6 5.1 1.9
Source: MorningStar            
Returns as on Oct 12th, 2012 *Fund size as on Sept 30th, 2012          

 

 

§ Religare Tax Plan (G)

Objective: To generate long-term capital growth from a diversified portfolio consisting around 20 to 50 stocks with strong fundamentals.

Investment style: Bottom-up approach

Top Sectors: Financial services, energy, FMCG, information technology and healthcare which constitutes around 65% of total portfolio.

§ Canara Robeco Equity Tax Saver (D)

Objective: This scheme seeks capital appreciation by investing around 85-95 per cent of the corpus in equity and debt instruments and remaining 15 per cent in money market instruments.

Investment style: Mixture of top down approach and bottom up approach.

Top Sectors: Financial services, energy, technology, FMCG and automobile which constitutes around 65% of total portfolio.

§ Fidelity Tax Advantage fund (G)

Objective: To generate long-term capital growth from a diversified portfolio of predominantly equity-related securities.

Investment style: Bottom up approach.

Top Sectors: Financial services, energy, technology, FMCG and healthcare which constitutes around 70% of total portfolio.

§ Franklin India Taxshield Fund (G)

Objective: This scheme seeks medium to long term growth of capital, with income tax rebate on investments.

Investment style: Bottom up approach.

Top Sectors: Financial services, energy, information technology, healthcare and automobile which constitutes around 65% of total portfolio.

§ HDFC Taxsaver Fund (G)

Objective: This scheme seeks capital appreciation with at least 80 per cent exposure to equities, preference shares and bonds of companies.

Investment style: Top down approach.

Top Sectors: Financial services, energy, engineering, FMCG and healthcare which constitutes around 70% of total portfolio.

Top Equity Diversified mutual funds for SIP

Scheme Name

Benchmark Index

*Fund Size

(Rs Crore)

Total Return (Annualized) in %

1 Yr

3 Yr

5 Yr

Total expense ratio (%)

SBI Magnum Emerging Business (G)

BSE 500

733.8

23.9

21.8

6.3

2.9

ICICI Prudential Discovery (G)

CNX Midcap

1,985.2

23.8

13.7

12.5

1.9

HDFC Midcap Opportunities

CNX Midcap

2,267.1

16.5

16.9

10.3

1.9

Reliance Equity Opportunities (G)

BSE 100

3,830.1

22.3

17.3

9.8

1.9

Source : Morning Star

Returns as on Oct 12th, 2012 * Fund size as on Sept 20th, 2012

§ SBI Magnum Emerging Business (G)

Objective: The schemes primary objective is to focus on investments in emerging business themes, primarily based on the export or outsourcing opportunities and global opportunities of such themes. It will also focus on emerging domestic investment themes.

Investment Style: Bottom up approach

Top Sector Allocation: Financial service, oil and gas, automobile, information technology and healthcare which constitute around 60% of total portfolio.

 

§ ICICI Prudential Discovery (G)

Objective: To invest in a well-diversified portfolio of value stocks and attractive financial valuations.

Investment Style: Value investment approach in which fund manager is scrutinizing undervalued stocks available at attractive valuations in relation to their PE, BV or current/ future dividend.

Top Sector Allocation: Healthcare, financial service, oil and gas, services and information technology which constitute around 50% of total portfolio.

§ HDFC Midcap Opportunities (G)

Objective: To generate capital appreciation in long term by investing mainly into mid cap and small cap stocks.

Investment Style: Bottom up approach

Top Sector Allocation: Healthcare, financial service, engineering, chemicals, FMCG and metals which constitute around 60% of total portfolio.

§ Reliance Equity Opportunities (G)

Objective: To invest in stocks across sectors that would drive the economy in long term.

Investment Style: Top down approach

Top Sector Allocation: Information technology, automobile, services, healthcare and financial service which constitute around 65% of total portfolio.

Best Balanced Funds for SIP

 

Scheme Name

Benchmark Index

*Fund Size

(Rs Crore)

Total Return (Annualized) in %

1 Yr

3 Yr

5 Yr

Total expense ratio (%)

HDFC Prudence (G)

Crisil balanced

6,032.6

12.7

12.3

10.8

1.8

Tata Balanced (G)

Crisil balanced

373.9

18.1

10.9

7.4

2.3

Canara Robeco Balanced (G)

Crisil balanced

192.0

14.6

10.5

7.1

2.0

DSP Blackrock Balanced (G)

Crisil balanced

638.3

9.5

7.2

7

2.1

Birla Sunlife 96 (G)

Crisil balanced

537.2

11.2

8.3

7.8

2.3

Source: Morningstar

Returns as on Oct 12th, 2012   * Funds size as on Sept 30th, 2012

§ HDFC Prudence (G)

Objective: The investment objective of the scheme is to provide periodic returns and capital appreciation over a long period of time, from a judicious mix of equity and debt investments, with the aim to prevent/minimize any capital erosion.

Investment Style: Top down approach

Top Sector Allocations: Automobile, Metals, oil and gas, healthcare and financial service which constitute around 45% of total portfolio.

§ Tata Balanced (G)

Objective: To invest in equity and debt oriented securities so as to give investors balanced returns.

Investment Style: Top down approach

Top Sector Allocations: engineering, oil and gas, healthcare, financial service and diversified which constitute around 50% of total portfolio.

§ Canara Robeco Balanced (G)

Objective: To provide medium to long term growth of capital and also to distribute income by investing in equities, fixed income securities, other debt instruments and money market instruments etc.

Investment Style: Top down approach

Top Sector Allocations: Financial service, oil and gas, FMCG, construction and technology which constitute around 50% of total portfolio.

§ DSP Blackrock Balanced (G)

Objective: To generate long term capital appreciation and current income from a portfolio constituting equity and equity related securities as well as fixed income securities.

Investment Style: Top down approach

Top Sector Allocations: Financial service, oil and gas, automobile, diversified and information technology which constitute around 45% of total portfolio.

§ Birla Sun Life 95 (G)

Objective: Long term growth and income, through a portfolio with a target allocation of 60% equity, 40% debt and money market securities.

Investment Style: Top down approach

Top Sector Allocations: Financial service, oil and gas, information technology, automobile and FMCG which constitute around 45% of total portfolio.

The above discussed mutual funds category are the most popular among investors. You can also invest in sector oriented mutual fund schemes through SIP. Each scheme has minimum SIP amount in the range of Rs 100 to Rs 10,000 specified in Key Information Memorandum. There is no maximum limit to invest through SIP in any MF scheme. You can start SIP investments not only in equity related schemes but also in debt funds, liquid funds, gold funds, etc.

Absolute returns, annualized returns and objective of the schemes are not the only criteria an investor should consider while investing. Also, there are various risks involved while investing in mutual funds which need to be analyzed before investing and while reviewing, in order to get advantage of good returns by investing in mutual funds for long term.

Author

Hiral Thanawala is a PGDM (Finance) graduate and Certified Financial Planner. The views explained by him are personal. He can be reached at hiralthanawala@gmail.com

Published Oct 17 2012


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