Which Is The Best Sip Investment Plan In India - If you have been a long time follower of my blog then you know that every year I publish my top 10 SIP mutual funds to invest in India. As usual, I am posting my top 10 SIP mutual funds to invest in India in 2022.
Note:- See my debt fund recommendations for 2022 in "10 Best Debt Mutual Funds to Invest in India in 2022".
Which Is The Best Sip Investment Plan In India
First off, I'm so sorry for posting this post so late. Many of my readers have been waiting a long time. However, due to my hectic fee-only financial planning service, I haven't been able to post as much as I normally would in December or January.
Best Sip Mutual Funds To Invest In 2017
Let me repeat what I recommended last year (10 Best SIP Mutual Funds to Invest in India in 2021).
If you remember, since almost two years, I stayed away from active fund recommendations and adopted passive funds (index funds) and the reasons are as follows:
By accepting index investing, you end your search for the BEST MUTUAL FUND COMPANY and the BEST FUND MANAGER. Investing in index fund and expecting index return is the easiest way to invest. The only risk you cannot avoid is market risk, which you have to manage with proper asset allocation between debt and equity (I mean at portfolio level).
As you may know, many AMCs are now issuing many index funds. Because they are trying to follow the trend. Few started with the idea of low cost and few brought complications by launching smart beta funds. However, in my opinion owning the entire market (especially Nifty 100) is much better than these various smart beta index funds. I know they can reduce volatility. However, it comes with compensation for returns. Hence, for simplicity, owning Nifty 100 is much better. Remember the quote from John Bogle.
How To Choose The Best Sip For Me To Invest In 2022
“The winning formula for investing success is to own the entire stock market through an index fund and then do nothing. Just stay the course.”
Owning index funds is good. However, sticking to this strategy requires a lot of patience. As you may know, we are inundated with information day after day (I call it ZhURMA) and apparently there may be few active funds currently beating the index. During such a period, you start doubting your strategy of adopting index investing.
Buying funds based solely on their past performance is one of the dumbest things an investor can do.
". Most new mutual fund purchases are based on their past performance. We HOPE the past performance repeats. However, the fund managers themselves are not sure if they are repeating the same past performance. But we investors are forced to believe that it will happen again.
Systematic Investment Plan: Sip Benefits & Best Sip To Invest In 2022
“If I had to sum up my views on investing, it's this: every investor should choose a strategy that has the highest chance of successfully achieving their goals. And I think for most investors, dollar cost averaging in a low-cost index fund will offer the highest chance of long-term success.” – Morgan Housel, The Psychology of Money (Timeless Lessons on Wealth, Greed, and Happiness).
Hence, we all know that there are few fund managers who can beat the index. However, finding such rare species that can beat the index OVERWHELMING is the biggest task and in fact an impossible task.
The costs you pay them are fixed. However, returns are not fixed. If a fund manager claims that his fund outperforms the index, then you should check what is the actual return after expenses and how consistently he can deliver returns.
When you decide to invest in index funds, you should focus on only three aspects of the funds and they are as follows.
How To Decide How Much To Invest In Sips
# Tracking Error:-It is nothing but how much the fund deviates in terms of return relative to the benchmark index. Lower tracking error means better fund performance. Few fund houses do not publish this data regularly. Therefore, you should be careful with this data.
If you follow these criteria, then index NGOs are also not taken into account. Once they have good AUM with historical tracking error, you can look at them.
Before jumping into investing, you should have an idea of the basics of investing. I repeat this exercise every year in my blog post. But you still find the same type of questions from readers. Therefore, to give you clarity, I am writing once again.
In my opinion, before undertaking an investment, one should be aware of how well prepared one is to face financial emergencies. Financial emergencies can be loss of life, meeting with an accident, hospitalization or sudden loss of income or job loss.
How To Choose A Sip?
Therefore, the first step is to cover yourself with a suitable life insurance (Term life insurance where the coverage should be at least 15-20 times your annual income). You must have your own health insurance (instead of relying on employer-provided health insurance). Create better coverage with Family Floating Plan and Super Up Health Insurance. Ideally around 3-5 Lakh for Family Floating Plan and around Rs 10-25 Lakh. for Super Up Up is a must nowadays. Buy about 15 to 20 times your monthly salary as accident insurance. Then finally build an emergency fund of at least 6-24 months of your monthly commitment. This will come in handy when your income stops or if you are faced with unplanned expenses.
Once you've done these basics, think about investing. If your foundation isn't done right, then whatever investment building you're building could collapse at any moment. Let's go ahead and understand the basics of investing.
I have noticed that many investors simply invest in mutual funds just because they have excess money. The second reason could be that one is led that mutual funds are best in the long run as compared to bank FDs, PPF, RD or even LIC endowment products.
If you have clarity such as why you are investing, when you need money and how much money you need at that moment, then you will have more clarity in choosing the product. Therefore, first, determine your financial goals.
Sip Vs Lumpsum: Which Investment Is Better?
You need to know the actual costs for this purpose. Along with this, you need to know the rate of inflation associated with that particular goal. Remember that every financial goal has its own inflation rate. For example, the cost of your child's education or marriage inflation is different from the inflation rate of household expenses.
By identifying the current price, time horizon and inflation rate of that particular target, you can easily understand the future price of that target. This future target price is your target amount.
I wrote a separate post on how to set your financial goals. Read the same in "Financial Goals - How to Set Them Before You Jump Into Investing?"
The next step is to identify the asset allocation. Whether it's a short-term or long-term goal, proper asset allocation between debt and equity is a must. I personally recommend the common asset allocation strategy below. Remember that it can vary from person to person. However, the main idea of asset allocation is to protect your money and achieve your financial goals smoothly.
Mutual Fund Sips
If the target is under 5 years - Do not touch the capital product. Use debt products of your choice like FD, RD, liquid funds, money market funds or short term funds.
While choosing a debt product, ensure that the maturity period of the product matches your financial goals. For example PPF is the best debt product. However, it should meet your financial goals. If the maturity period of PPF is 13 years and your target is 10 years, then you will not achieve your financial goals.
First full disbursement of debt with EPF, PPF or SSY (based on maturity and purpose type). If you still have the option to invest in debt, go for debt funds. Personally, my choice is always to top up these wonderful debt products like EPF, PPF and SSY.
The next and biggest step is the expected return from each asset class. On equity, you can expect around a 10% to 12% return. For debt, you can expect a return of 6% to 7%.
Systematic Investment Plan (sip)
When your expectations are set, then you are less likely to deviate or react to volatility.
Once you know what your expected return is from each asset class, the next step is to identify the portfolio's expected return.
Let's say you set your debt:equity asset split as 40:60. The expected return on debt is 6% and equity is 10%, then the total expected return on the portfolio is as follows.
After defining the goals with the target amount, making the asset allocation, determining the expected return from each asset class, then the last step is to identify the amount to be invested each month.
Why An Sip Is A Better Choice Than A Lump Sum Investment Axis Bank
There are two ways to do it. One is a constant monthly investment throughout the target period. The second way is
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