Mutual funds: How SIPs can help beginners in accumulating multicrore corpus. Here are 5 funds to start with

Investing is changing with a diverse market of retail investors. New-age zoomers entering the workforce are becoming financially independent, impacting companies. Gen Z is reshaping money management with a proactive approach, using tech tools for informed decisions. Platforms like YouTube empower them with financial education, leading to sound investment choices. 

Experts feel that across generations mutual fund investment is a wise choice. Like in April 2024, investors continued to choose mutual funds with Systematic Investment Plans (SIPs). The total SIP inflows in April touched a record high of Rs 20,371 crore, reflecting a 6.7% increase compared to the three-month average. The data analysed by brokerage Geojit Insights reveals that for the 10th month in a row, SIP inflows have exceeded Rs 15,000 crore, demonstrating ongoing investor enthusiasm. Active SIP accounts hit a new peak in April with 8.70 crore accounts, up by 6.5% from the 3-month average. Year-on-year, there was a notable 35.5% rise, showing a surge in new accounts. The average SIP size grew by 9.6% annually, now at around Rs 2,340 per SIP, suggesting increased investor contributions.

SIPs for beginners

Speaking about investment for starters, Hrishikesh Palve, Director, Anand Rathi Wealth Limited, said: "SIPs are the best instruments to ride the market volatility and this can be done very easily today via investing in mutual funds. Let us understand the reasons for the same."

Palve added as SIPs are light on pocket one doesn’t need to accumulate a significant corpus first and then start investing. 

Palve said: "A 10,000 SIP after 10 yrs at a 12% return would give you 23 L, and at a 14% return would give you 26L. As an investor, you need to decide your investment horizon based on your financial goals. You need to align your SIP amount and chosen investment schemes with your risk appetite and objectives."

 

	12% expected return	14% expected return
SIP	Rs. 10,000	Rs.10,000
Time	10 yrs	10 yrs
Corpus	0.23 Cr	0.26 Cr

 

A Step-up SIP

For investment beginners, Palve said a step-up SIP makes sense in long term. "In a step-up SIP, your SIP amount increase automatically at a pre-determined rate and time frame. For instance, a person investing Rs.5000 monthly via an SIP can choose the step-up plan, and request their fund house to increase the amount annually at his chosen rate, such as 10%. So, after 12 months, his next deduction would be Rs.5500 for one year, and then Rs.6050. Similarly, it would increase by 10% every year," Palve explained.

 

SIP Amount	Years invested with a 14% expected return – no step up			Years invested with a 14% expected return – SIP Step up@10%
	10 years	20 years	30 years	10 years	20 years	30 years
Rs. 5,000	0.12 Cr	0.65 Cr	2.7 Cr	0.18 Cr	1.2 Cr	6.2 Cr
Rs. 10,000	0.25 Cr Advertisement	1.3 Cr	5.5 Cr	0.37 Cr	2.4 Cr	12 Cr
Rs. 20,000	0.51 Cr	2.6 Cr	11 Cr	0.74 Cr	4.9 Cr	25 Cr

Market proof

Palve said investors can invest in mutual funds despite fluctuations in the market and increasing volatility due to various factors. "Investors can keep emotions at bay as SIPs automatically purchase in both high and lows and the investor need not closely track the market movements," he said.

Market Cycle	SIP Start Month	Nifty 50 Index	Market Correction (%)	Correction Tenure (Months)	SIP Period (Years)	Amount Invested (in Lakh)	Valuation as on 29-Feb-24 (in Lakh)	Difference in Invested Amt. (in Lakh)	Difference in Final Value (in Lakh)	SIP XIRR (%)
1	05-09-1996	1037.47	24%	3	27.59	33.10	276.79	0.30	7.20	12.99%
	04-12-1996	788.15			27.34	32.80	269.60			13.01%
2	04-08-1997	1250.4	35%	14.73	26.67	32.00	251.83	1.40	29.78	13.11%
	20-10-1998	808.7			25.46	30.60	222.05 Advertisement			13.29%
3	11-02-2000	1756	51%	19.6	24.15	29.00	189.16	1.90	32.06	13.36%
	21-09-2001	854.2			22.54	27.10	157.10			13.56%
4	14-01-2004	1982.15	30%	4.13	20.22	24.30	99.71	0.40	4.55	12.43%
	17-05-2004	1388.75			19.88	23.90	95.15			12.41%
5	10-05-2006	3754.25	30%	1.17	17.90	21.50	69.53	0.10	0.67	11.90%
	14-06-2006	2632.8			17.81	21.40	68.86			11.93%
6	08-01-2008	6287.85	59%	14.2	16.24	19.50	58.35	1.40	7.95	12.37%
	09-03-2009	2573.15			15.07	18.10	50.39			12.55%
7	05-11-2010	6312.45	28%	13.67	13.41	16.10	40.70	1.30	5.43	12.92%
	20-12-2011	4544.2			12.29	14.80	35.27			13.33%

 

5 funds for investors to start SIPs

Palve further suggested five schemes that can help beginners help a handsome corpus after 20 or 30 years.

Scheme Name	Category	1 Yr	3 Yr	5 Yr
Quant Large Cap Fund-Reg(G)	Large Cap Fund	45.8
Canara Rob Flexi Cap Fund-Reg(G)	Flexi Cap Fund	26.2	15.7	17.3
Quant Active Fund(G)	Multi Cap Fund	44.8	22.7	29.5
ICICI Pru Focused Equity Fund(G)	Focused Fund	40.9	22.4	20.2
HDFC Small Cap Fund-Reg(G)	Small cap Fund	41.6	28.5	23.6

              
 Disclaimer: The views and investment tips by investment experts are their own and not that of Business Today. Readers are encouraged to consult a qualified financial advisor or a SEBI-registered investment advisor before making any investment decisions.