Top 5 Mutual Funds to Start SIP in 2018
For steady growth you need to be dedicated towards your goal. And this rule applies to the process of investing in mutual funds through SIP as well. SIP investment in mutual fund schemes gives dual perquisites - compounding effect on your returns and averaging of the risk parameters over varying market cycles, provided that you’re committed for long-term. As per the analysts, most of the times SIPs tend to do better under different circumstances, over a sufficiently long period of time.
Counting the benefits of investing through the SIP mode, we are listing top 5 mutual funds to start your investment in 2018. The list includes the top performers of the categories such as large-cap, multi-cap, small-cap, ELSS, and balanced fund. The selection of the funds is based on their past performance, comparison of their performance with the peers, investment style, and risk-related parameters.
Kotak Select Focus Fund
Past Performance: Kotak Select Focus Fund belongs to the large-cap category and is considered among the prominent ones due to its exceptional performance in the past. Being relatively a newcomer, the fund has been able to build an impressive track record by beating both its benchmark and category average over its 8 years of existence. The fund has managed to generate 11.36% and 21.08% annualized returns over the period of 3- and 5-years, respectively, whereas the benchmark’s (Nifty 200) returns were 7.45% and 14.23% for the same period of time.
Investment Style: The fund has been constructed with a philosophy of sector diversification acknowledging that different sectors perform distinctively over different economic cycles. According to the fund manager, the portfolio of the fund includes the stocks with lower valuation and better earning potential as compared with others. This fund picks up individual investment ideas in a top-down manner from the sectors selected by the bottom-up approach. According to the fund’s mandate, the portfolio can be flexibly spread across market capitalization to pick the best investment opportunities. The fund is overweight in the banking and financial sector where the credit growth is relatively strong and asset quality risks are minimal.
L&T India Prudence Fund
Past Performance: In the balanced category, we have chosen to bet on L&T India Prudence Fund due to its value-oriented stock selection. With this investment strategy, the fund has been able to generate 9.69% and 18.70% annualized returns in 3- and 5-years, respectively to beat the benchmark’s (CRISIL Short-Term Bond) 7.57% and 14.31% returns for the same period of time. The fund has been adequate to stand out in comparison with its peers during the distinct peaks of the market rising due to sustained flow of liquidity, by investing at reasonable valuations.
Investment Style: The bottom-up stock picking process of the fund incorporates fundamental research to own the fundamentally strong businesses at appropriate valuation. The fund invests 65%-75% of its assets in equities and the rest in debt and money market instruments. As per this allocation, the fund can be a suitable pick for the first-time or low risk-taking investors with 3 to 5 years of investment horizon.
Reliance Small Cap Fund
Past Performance: Reliance Small Cap Fund has been the most recommended scheme in the small-cap category with its unquestionable performance in the category with the huge returns every year. Being a small-cap fund, it may be exposed to higher risk but the rewards are equally appreciable. In fact, during the bullish market of 2013-2016, the performance of the fund was par excellence in comparison with its benchmark as well as category. With all the credits to research capabilities, Reliance Small Cap Fund has consistently beaten its benchmark (S&P BSE Small Cap) and category over multi-trailing period by generating 22.13% and 36.2% returns over 3-year and 5-year period, respectively. Even in the bear phases, the fund has been consistent without leaning much on the large-cap stocks.
Investment Style: The fund majorly invests in the small and mid-cap companies that generally perform well during the short bull cycles. The fund is value-oriented and acquires benefits by selecting fundamentally sound companies in the domestic sectors which offer demands for investments with medium term horizon. Apart from the investment strategy, the minimum investment amount of Rs. 100 is another compelling reason to start the SIP in this fund right away. As compared with its peers, the only vulnerable point of the fund is its volatility. Otherwise, for a longer term perspective, Reliance Small Cap Fund is anticipated to outperform its benchmark and will definitely create wealth.
L&T Tax Advantage Fund
Past Performance: Along with the tax-saving benefits, L&T Tax Advantage Fund has outshone in the ELSS category in terms of its past performance. Even during the market slump of 2008 and 2011, it has outperformed its benchmark index. The portfolio is strategized to spread across the minimum number of stocks possible to avoid the concentration risk. As a resultant of low concentration risk and unbiased approach, the fund has generated 13.23% and 19.91% annualized returns over 3-year and 5-year period leaving behind the benchmark (S&P BSE 200) by approx. 4% both the times.
Investment Style: The scheme has a limited exposure to small-cap stocks and has better downside protection which places the fund’s risk profile below the benchmark and category. High returns and low risk profile consequently ranks this fund higher on the risk-reward parameter. It is a considerable choice from a long-term perspective with added perks of tax deduction.
Aditya Birla Sun Life Advantage Fund
Past Performance: A fund that has generated 40 times more return in 2015 since inception. Despite its peers who are performing in the current scenario, experts recommend starting your SIP in Aditya Birla Sun Life Advantage Fund as it has stood in the bad times and has yielded stellar returns in both bull and bear market cycles over a long time period. As far as the past 3- and 5-years performance is concerned, the fund has beaten the benchmark (S&P BSE 200) by generating 10.91% and 22.61% annualized returns, respectively.
Investment Style: This multi-cap scheme has a right mix of large and mid-sized companies which makes it a favorable choice during high valuation of the stocks. The fund manager uses a combination of the top-down and bottom-up approach to pick attractive stocks. The fund has high visibility of earnings growth, despite some of the expensive calls of the fund manager.
The experts advise the investors to pay due regard to the prudent asset allocation and long-term focus of the funds before making a choice. They suggest following the SIP route to enter the equity market in a disciplined and staggered manner with long-term investment horizon. Chasing the market momentum even during its upward movement can mislead your investment.
If you have zeroed in on any of the above options then visit the Start SIP page of our website or contact our experts to start investing.