Investment is the key to financial security.

Among various investment options, mutual fund is the one where your money is invested under the supervision of an experienced fund manager.

You have two options to enter a mutual fund, one through lump sum investment and second, through systematic investment plan (SIP).

Systematic investment plan (SIP) is a growing tool of financial independence, that helps you to create wealth, by investing small sums of money every month in a mutual fund, over a period of time.

SIP helps you take the advantage of two most important investment strategies, that is rupee cost averaging and power of compounding. Moreover, SIP helps you to develop a disciplined approach of investing.

Why should you invest through SIP?

It has been more than a decade and a half since Franklin Templeton introduced the concept of SIPs in India.

Since then, SIPs trump most other mutual fund plans when it comes to wealth creation.

A mutual fund in itself has subsided other investment options as it gives an opportunity to beginners to enter the market with the desired level of risk.

Everyone has different financial priorities at different stages of life.

While you are busy planning your present financial needs, it is also important to plan your future financial requirements and it is a necessity to secure your family’s financial health at the onset of any unforeseen condition.

Mutual fund houses provide an additional facility of life insurance cover to their investors who invest via SIPs. This is known as different names, SIP Plus, Century SIP or SIP Insure, such schemes have been there in the market since long.

What are its benefits?

1.Wealth creation

SIP helps you save and grow your money over a period of time.

Investing regularly for a long duration can help you accumulate a sizeable corpus through compounding effect.

2.Achieving your financial goals

SIP is a perfect tool for people who have a specific, future financial requirement.

By investing a specific amount every month; you can plan and may meet your financial goals, be it your child’s education, marriage or a comfortable post-retirement life.

3.Liquidity

Having an adequate corpus to invest is a good habit.

But what is the use of money if you can’t use it when needed?SIP is one of the most liquid forms of investments and it can save you from a financially sicky situation, when required.

Best SIPs to secure your family’s financial future

1.ICICI Prudential Bluechip Fund

This is a large cap equity oriented mutual fund scheme which helps to generate long term capital appreciation.

It was launched on May 2008 and its return since launch is 15.21%. It has a moderately high risk with an above average return trend.

The fund has generated the maximum returns when invested via SIP.

The “SIP Insure” feature was introduced in this scheme on May 2012. With a little amount of risk this fund will help you to multiply your money and cover yourself for unforeseen situations.

Year Year 1 Year 3 Year 5
Returns 13.67% 16.76% 18.82%

2.Aditya Birla Sun Life Equity Fund

It is a multi-cap equity oriented mutual fund growth scheme which aims for long term capital growth.

It was launched on August 1998 and its return since launch is 24.01%. It has a moderately high risk with average return.

It has a diversified portfolio with primary investment in banking sector.

This scheme also provides an optional feature of “Century SIP” that is, it provides life insurance facility to the investors entering via SIP.

The fund has consistent returns and thus can be a reliable scheme for regular income.

Year Year 1 Year 3 Year 5
Returns 7.26% 17.97% 24.72%

3.Aditya Birla Sun Life Tax Relief’96

It is an equity linked saving scheme (ELSS) with the objective of long term growth of capital.

It was launched on March 1996 and its return since launch is 25.34%. It has a moderately high risk with high returns.

The investment amount in this scheme is eligible for deduction from the total taxable income up to a maximum amount of Rs.1,50,000.

To add on to the list of benefits, this scheme also provides an optional facility of life insurance as this is covered under “Century SIP” feature.

Thus, a high return with the tax benefit and life insurance is a great combination.

Year Year 1 Year 3 Year 5
Returns 16.80% 17.95% 24.93%

4.Reliance Large Cap Fund

It is a large cap equity oriented mutual fund which focuses on generatinglong-termm capital appreciation as well as consistent returns.

It was launched on August 2007, and its return since launch is 11.97%. It has an average risk and average return.

Further, it provides the facility of life insurance under the “SIP Insure” feature of the Reliance Mutual Fund house.

The risk of volatility is very less as the portfolio consists of equities of big companies and the facility of insurance makes the scheme more appropriate for an investor with low risk profile.

Year Year 1 Year 3 Year 5
Returns 15.78% 16.39% 22.06%

5.SBI Small Cap Fund

It is a small cap oriented fund and has an investment objective to seek long-term capital appreciation by investing in equity and related securities.

This is one of the best rated small cap funds and is suitable for slightly aggressive investors. The fund was launched on 2nd January, 2013 and has an expense ratio of 1.29%. It has given a return since launch of 20.74%

Year Year 1 Year 3 Year 5
Returns 13.90% 22.80% NA

Should you opt for a life cover?

Before deciding on whether to invest in mutual fund schemes with life cover, let us look how it works.

Once you have decided the SIP amount, then life cover in the first, second and third year  will be a specific multiple of the SIP amount, which could be 10, 20 and 30 times, respectively.

For example, if the monthly SIP is of Rs.5,000, then the life cover for 1st, 2nd and 3rd year will be Rs.50,000, Rs.1,00,000 and Rs.1,50,000 respectively.

Further, every scheme has a different coverage amount and age, till which the benefit can be availed.

Conclusion

Thus, by smart investment choices, you can grow your money as well as protect yourself from the uncertainty of the future.

It is a good choice to invest in an SIP and secure your family’s future.

But, before choosing the SIP scheme to invest in you should go through the insurance terms very carefully, the maximum coverage amount, the age till it covers the charges, how to redeem the insurance claim, etc.

At the end, SIP is an investment option to grow your money and not to insure your future.

This is just an additional facility that is provided by mutual fund houses. So, don’t just invest in an SIP because of free life insurance.

Happy Investing!

Disclaimer: The views expressed in this post is that of the author and not those of Groww