If there was a single answer to this question, everyone would have put their money in that Mutual Fund SIP. The best Mutual Fund for SIP depends on few parameters, the time period and the risk one is willing to take are the key ones.

Best Mutual Funds for SIP

Choice of Mutual Fund for SIP should depend on the goals of the investment. Most of the time, the goal is to build wealth. In that case, one should look for long-term investments in the Mutual Funds. Few people also invest with a definitive time frame – it could be for buying a house in 3 years or going on an international vacation next year. In that case, one should go for medium risk good returns mutual funds. Here are the best funds for doing SIP for different investment needs.

Long Term High Growth SIP

For the long term if you are looking for high growth opportunities, go for a Mid and Small Cap and Diversified Funds. You might have to switch the funds depending on the performance of the funds over next 3-5 years. But as of today the following funds are looking promising –

*Accepting only SIP up to 25,000

Medium Risk Good Returns SIP

If you don’t want to take too much of risk on your investment you can consider Large Cap or Balanced Funds. These are relatively consistent performers and are suitable for 3-5 years.

No Risk High Liquid SIP

If you don’t want to take any risk on your investments and may need the money anytime, you should go for short-term debt funds. These funds are the most consistent funds because they don’t invest the money in Equity. The expected returns are ~2% higher than the FD, with 100% liquidity. You can withdraw your money anytime, without any penalty.

As we all know, the Mutual Funds are subject to market risk. But if you are investing through SIP, the risk is lower than otherwise. You need to choose your investment according to the time horizon and your risk appetite. Once you pick the suitable Mutual Fund, you can start the SIP and set a date for monthly, auto investment.

How much will you make from your SIP (S)

Here is the calculator to estimate what wealth you can build over the tenure of your SIP investments.

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What is a SIP

Systematic Investment Plan

Mutual Fund Systematic Investment Plan

A Systematic Investment Plan (SIP) is a smart and trouble free method to invest in mutual funds. It allows you to invest some amount of money in a very systematic way on a regular basis. When I say regular basis, it can be weekly, monthly, quarterly, yearly etc depending on the investor’s choice. SIP is a completely pre-planned investment approach and helps you to inculcate the habit of investing regularly and thereby accumulating wealth for the future.

When is a Good Time to Start SIP

The best time to start SIP is right now.

Starting a SIP should not be dependent on the existing market levels. A person who wishes to invest in equities should buy more when markets are low and sell when markets are high. But this cannot be predicted by anyone. Thus to avoid any major losses one can always go ahead with SIP. This way you can protect yourself from the volatile market conditions. For instance, if the markets are very low and you invest via SIP you end up buying more units. And when the market recovers you make really good returns for all the units brought.

Why choose SIP?

It is very flexible and an easy investment option. Your money gets automatically deducted from your account in regular time intervals and is directly invested into mutual funds. Based on the net asset value (NAV) for the day, you are allocated some units of MF. This will be on the basis of the ongoing market rates. Each time you make an investment more units of MF is brought at varying market rates (on that particular day).

Two Key Benefits of SIP in Mutual Funds


The basic idea of compounding is that the sooner one starts investing, the more time he gets for the money to grow. Starting a SIP early in life will fetch you higher returns. The amount invested needn’t be huge. Start with a small amount and increase it as years go by.Let’s look at an example;

If you started investing Rs. 5000 a month from the day you turn 40, in 20 years time you would have accumulated Rs. 12 lakhs. If that investment grew by 7% per year on an average, it would be worth Rs. 26.2 lakhs when you reach 60.

But, if you started investing 10 years earlier, your Rs. 5000 each month would add up to Rs.18 lacks over 30 years. Assuming the same annual growth of 7% you would have Rs. 61 lacks on your 60th birthday. This is more than double the amount you would have received if you had started 10 years later! This is the power of compounding.

Rupee- Cost Averaging

Since you are on this plan, you become a regular investor and thus your invested money fetches you more units when the price is low and lesser units when the price is high. Hence, even if the market is volatile it will not affect you as much as others. This also allows you to achieve a lower cost per unit.

Another important factor to keep in mind while starting a SIP is that, do not look for returns in a short period of time. Even though SIP does not have a lock in period, the complete benefit from this can be obtained somewhere between 4-5 years. So, SIP is the best fit solution for long term gains.

Starting a SIP right now is the next best thing you can gift yourself for your future.

Which is better RD or SIP in a Mutual Fund?

As we have understood that mutual fund SIP is not a product. SIP is a way to investing in Mutual Funds. Also, unlike RD where the interest rates are fixed, Mutual Funds give returns that are subject to market risk.

Types of Mutual Funds

Broadly there are three categories of Mutual Funds

  1. Equity Mutual Funds – where the money is invested in share market. Most of the people know of this kind only. These mutual funds are volatile and highly rewarding as well.
  2. Debt Mutual Funds – where the money is invested in bonds, government securities etc. in simple words – loaned to the government of India, banks, large corporates etc. These are safe funds, but the returns are very modest (7–12%)
  3. Hybrid Funds – 65–75% equity and balance debt – good option for moderate risk and moderate returns.

So comparing Mutual Funds with RD would make sense when we choose a category of mutual fund. Here are more differences.

Equity or Hybrid Funds

RD could be better than SIP in mutual funds or could be worse. Depends on the time horizon. If you are investing for more than 5 years (3 years in the case of hybrid) then very likely you will get higher returns in SIP in such funds than RD. But if your time horizon is less than 3 years, then the answer is ‘subject to market risks’.

Debt Funds SIP vs RD

Yes, SIP in a debt fund would be more profitable than RD.

  1. the returns are higher
  2. debt funds have much lesser taxes than RD if the money is kept for more than 3 years. Read about the taxation on mutual funds.

Let’s see how much difference it would make for a SIP in Mutual Fund vs RD over 3 years.

Mutual Fund SIP Returns vs RD Returns

Mutual Fund SIP Returns vs RD Returns

Therefore go for debt funds SIP if your time horizon is short, else go for equity/hybrid mutual fund SIP. But SIP would be better than RD any day.

Canceling, Altering and Renewing Mutual Fund SIPs

How Can You Cancel SIP Midway?

Let’s say, for example, you invested some amount in SIP for a period of 24 months. By 2-3 months time you realize that you are unable to pay the amount and you want to stop the SIP.Are you allowed to do that? Should you pay some penalties for this?

Yes, you can definitely withdraw your SIP midway. Also, you do not have to pay any penalties associated with this. Because SIPs are done voluntarily by customers and the Asset Management Companies (AMC) cannot charge you any penalty for the cancellation. The procedure and time have taken to cancel a SIP depend on the fund house.

On an average scale, SIP cancellation takes anywhere between 2-4 weeks of time. If you enrolled for SIP online, you will have to submit the cancellation request online itself. Normally online requests are processed at a higher rate than the off-line ones.

How Can You Alter SIP Amount?

Since it is possible to cancel your SIP, altering it is not impossible. All you would need to do is cancel your existing SIP and replace it with the new SIP with the amount of your desire. The process of altering a SIP is a little more complicated and lengthier than canceling if in case you had submitted Post Dated Cheques.

Furthermore, the terms, conditions and the procedures differ from various fund houses. Always, it is best to get in contact with your fund house to know the exact alteration process.

How Can You Renew Your SIP?

For example, let’s say you finished a SIP with a duration of 36 months. Now you would like to continue the same SIP for another 36 months. Can you renew your existing SIP or should you start fresh? While most of the top tier AMCs let you renew your SIP, some AMCs do not support this and will ask you to start a fresh SIP.

To renew the SIP you will just have to fill the SIP renewal form. This will be provided by the respective fund houses with all the required details. You will be an allowed to change the frequency, amount, dates of investing etc. It is always better to send in the renewal request at least a month prior to the expiry of your current SIP.

The crux about SIPs is that they are one of the most easily workable investment vehicles. Investors should always start a SIP. It helps them to invest even in volatile market conditions as well makes regular investing a habit by safeguarding their future.

How Can You Pause SIP?

Yes, you can pause your SIP for specific periods of time. The shortest and the longest time period depends on your fund house. To enable this service one must first get the SIP-Pause form from your AMC. Fill in the details and mention the start date and end date for the pause period. The form will also contain a bank mandate which must be filled and signed. This is to instruct the bank not to debit money during the SIP-Pause period. This form must be submitted at least a month before the investor wishes to pause the SIP.

The SIP will resume automatically after the pause period is completed. One important point to note is that not all AMCs allow SIP-Pause. So, it is always better to check this facility before starting the SIP. Plus, SIP-Pause is available only once per tenure.

What happens if I miss a month’s payment?

Nothing happens if you miss a month’s payment. There is no penalty levied by the mutual fund. But you may incur some bank charges for subsequent mandate failure (equivalent to cheque bounce). The coming month onwards you will get the normal trigger for your payment. You can always make an additional purchase for the lapsed amount later on.

If you have started your SIP through Groww you can write to us at support@groww.in or just call us at 91-9108800604 for canceling, renewing or altering your SIP.

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