Best SIP Investment Plan For 3 Years

Many individuals aspire to build wealth over time. One effective strategy for accomplishing this is through Systematic Investment Plans (SIPs) in mutual funds. SIPs offer a convenient and disciplined approach to investing, allowing individuals to invest a fixed amount at regular intervals.

What is a Systematic Investment Plan (SIP)? 

A Systematic Investment Plan (SIP) is a strategic way to invest in mutual funds. It involves committing to invest a fixed amount at regular intervals, such as monthly or quarterly. This predetermined sum is automatically deducted from your bank account and invested in your chosen mutual fund scheme. SIPs promote disciplined investing, making it easier to stay invested and benefit from rupee cost averaging.

10 Best SIP Plans for 3 Years In India To Invest In 2024

Here are the top 10 mutual fund SIP schemes based on their past performance and expense ratio:

Note: Data as of May 31, 2024 | Absolute Returns are Taken

An Overview Of The Top SIP Plans Investment In India 

If you have a 3-year investment horizon, here are some top SIP plans to consider:

Quant Mid Cap Fund - Direct Plan - Growth

● Type: Mid Cap Fund
● Launched: January 2013
● AUM: ₹6,920.17 crores (as of May 31, 2024)
● Expense Ratio: 0.62%
● 3-Year Returns: 79%
● Overview: This fund invests in sectors like Energy, Services, Financial, Healthcare, and Metals & Mining. It has shown strong performance and resilience in tough market conditions.

Quant Small Cap Fund - Direct Plan - Growth

● Type: Small Cap Fund
● Launched: January 2013
● AUM: ₹20,164.09 crores (as of May 31, 2024)
● Expense Ratio: 0.64%
● 3-Year Returns: 74%
● Overview: With a focus on sectors like Financial, Energy, Metals & Mining, Services, and Construction, this fund has delivered robust returns, although it has a slightly lower performance in down markets.

ITI Mid Cap Fund - Direct Plan - Growth

● Type: Mid Cap Fund
● Launched: February 2021
● AUM: ₹820 crores (as of May 31, 2024)
● Expense Ratio: 0.43%
● 3-Year Returns: 70%
● Overview: This newer fund invests in Capital Goods, Financial, Energy, Metals & Mining, and Healthcare sectors. It has shown solid performance with good control over losses.

Bank of India Manufacturing & Infrastructure Fund - Direct Plan - Growth

● Type: Sectoral/Thematic
● Launched: January 2013
● AUM: ₹293.80 crores (as of May 31, 2024)
● Expense Ratio: 0.94%
● 3-Year Returns: 69%
● Overview: This fund focuses on manufacturing and infrastructure, with investments in Energy, Construction, Metals & Mining, Automobile, and Communication sectors. It has average performance in down markets.

Quant Large and Mid Cap Fund - Direct Plan - Growth

● Type: Large & Mid Cap Fund
● Launched: January 2013
● AUM: ₹2,535.89 crores (as of May 31, 2024)
● Expense Ratio: 0.66%
● 3-Year Returns: 69%
● Overview: This fund invests in sectors such as Energy, Metals & Mining, Capital Goods, Financial, and Services. It has consistently outperformed peers in various market conditions.

JM Flexicap Fund - Direct Plan - Growth

● Type: Flexi Cap Fund
● Launched: January 2013
● AUM: ₹2,107.42 crores (as of May 31, 2024)
● Expense Ratio: 0.48%
● 3-Year Returns: 69%
● Overview: With investments in Capital Goods, Financial, Automobile, Construction, and Energy, this fund offers lower fees and strong performance in both up and down markets.

JM Value Fund - Direct Plan - Growth

● Type: Value Fund
● Launched: January 2013
● AUM: ₹665.51 crores (as of May 31, 2024)
● Expense Ratio: 1.02%
● 3-Year Returns: 69%
● Overview: This fund focuses on Financial, Capital Goods, Automobile, Consumer Discretionary, and Construction sectors. It has shown good performance with an above-average ability to manage losses.

Mahindra Manulife Mid Cap Fund - Direct Plan - Growth

● Type: Mid Cap Fund
● Launched: January 2018
● AUM: ₹2,433.01 crores (as of May 31, 2024)
● Expense Ratio: 0.47%
● 3-Year Returns: 66%
● Overview: This fund invests in Financial, Healthcare, Capital Goods, Metals & Mining, and Services sectors. It has performed well and charges lower fees compared to peers.

Bandhan Small Cap Fund - Direct Plan - Growth

● Type: Small Cap Fund
● Launched: February 2020
● AUM: ₹4,994.19 crores (as of May 31, 2024)
● Expense Ratio: 0.37%
● 3-Year Returns: 66%
● Overview: This fund focuses on Financial, Services, Healthcare, Metals & Mining, and Capital Goods sectors. It has a strong track record of performance and high ability to control losses.

Quant ELSS Tax Saver Fund - Direct Plan - Growth

● Type: ELSS
● Launched: January 2013
● AUM: ₹9,360.89 crores (as of May 31, 2024)
● Expense Ratio: 0.77%
● 3-Year Returns: 61%
● Overview: This tax-saving fund invests in Energy, Financial, Metals & Mining, Technology, and Consumer Staples. It has shown consistent returns and moderate performance in down markets.

Importance of SIPs in Financial Planning

SIPs plays a vital role in financial planning for several reasons:

● Rupee Cost Averaging: By periodically investing a fixed amount, you can potentially average the cost of your investments over time, mitigating the impact of market fluctuations.

● Disciplined Approach: SIPs encourage a disciplined investing mindset as you commit to investing a set amount regularly, regardless of market conditions.

● Compounding Benefits: SIPs allow you to harness the power of compounding, where your investment gains generate additional returns over time.

● Flexible and Affordable: You can start small with SIPs, investing as little as a few hundred rupees each month, making it an accessible option for investors with limited capital.

Why Choose a 3-Year SIP Plan? 

A 3-year SIP plan can be advantageous for the following reasons:

● Shorter Investment Horizon: This timeline suits short-term to medium-term financial goals, such as saving for a down payment, funding education, or building an emergency fund.

● Potential for Higher Returns: While longer horizons are generally recommended for equity investments, a 3-year SIP plan can still offer the potential for higher returns compared to traditional fixed-income investments.

● Diversification: Investing in a well-diversified portfolio of mutual funds through a 3-year SIP plan can help mitigate risk and provide exposure to different asset classes and sectors.

Factors to Consider When Choosing a SIP Plan 

When selecting a SIP plan, consider the following factors:

● Investment Objective: Determine your investment objectives, such as capital appreciation, income generation, or a combination.

● Risk Tolerance: Assess your risk tolerance level and choose a mutual fund scheme that aligns with your risk profile.

● Fund Performance: Evaluate the mutual fund scheme's past performance, keeping in mind that past performance does not guarantee future results.

● Expense Ratio: Consider the expense ratio of the mutual fund scheme, as it can significantly impact your overall returns over the long term.

● Fund Manager's Experience: Research the fund manager's experience and track record, as they can be crucial factors in the fund's performance.

SIP vs. Lump Sum Investment 

While SIPs offer benefits like rupee cost averaging, disciplined investing, and flexibility to start small, lump sum investments can also be an effective strategy with their own advantages and disadvantages:

SIP Advantages:
● Rupee Cost Averaging
● Disciplined Approach
● Flexibility to Start Small
● Reduced Impact of Market Volatility

Lump Sum Investment Advantages:
● Potential for Higher Returns (if timed correctly)
● Simplified Investment Process

The choice between SIP and lump sum investment depends on your investment goals, risk tolerance, and personal financial situation.

Conclusion

Investing in the right SIP plans can effectively achieve your short-term to medium-term financial goals. By considering factors such as investment objective, risk tolerance, fund performance, and expense ratio, you can choose a SIP plan that aligns with your investment strategy and helps you build wealth over time.