Congrats on the excellent decision of starting SIP. Small savings can have a big advantage in the long run.
There are two steps you should take to choose the right funds for your investment needs.
1. Choose the right category of Mutual Funds – Based on your investment horizon, risk appetite and returns expectations your answer will be different.
Equity Vs Debt?
If you are looking for ultra safe investments and are happy with returns below 10%, you should consider debt funds. You can read more about these funds here.
If you are considering SIP, you are most likely looking for long term and high growth. Therefore the right choice for you is Equity Funds.
Large Cap/Multi Cap or Mid Cap Funds?
The second level category selection is the type of equity funds.
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Large Cap funds – if you are looking to invest for 2-3 years with less risk, you should go for Large Cap funds. These funds can give around 12-18% returns if markets perform well.
Multi Cap funds – These are good funds for 3-5 years and moderate risk. These funds invest in companies of all sizes and the fund manager decides the allocation based on the market situation and opportunities available.
Mid/Small Cap funds – These are highly risky funds that give very high returns in long term (5-7 years or more). These funds invest in mid or small sized companies that have the potential of giving high growth.
For beginners with moderate risk appetite, multi cap funds and Large Cap would be most suitable.
2. Select the best funds in the chosen category of Mutual Fund
Once you are clear of the category, the next and final step is to identify the Mutual Funds in the category that are potentially good performers in future. Here is the criterion to choose the funds in a category –
1. Groww Rating (this includes best returns, consistency, AUM)
2. Minimum Investment – it should match your requirements
3. Asset allocation (should be true to the category)
Based on the above analysis, here is what I have come up with for your SIP requirements –
Hope it helps!