Systematic Investment Plans commonly known as SIP is the scheme of investment allowing a person to deposit a fixed amount in a mutual fund scheme. This enables the individual to invest small amounts of money on a weekly, monthly, quarterly, or yearly basis.

Owing to the instability of the market, it is never recommended to invest a large sum of money into equities. As a large sum investment will be kept off from your liquidity, it may cause you financial strain in difficult moments. For instance, if you have taken a home loan or a personal loan while keeping a large chunk of money invested in the equities, it will only add pressure on your EMIs. Also, in a fluctuating market, it may happen that your returns reduce substantially even to the point of becoming negative.

However, with SIP, the invested funds can be monitored on the basis of their performance. This will enable one to analyse his further investments in the given mutual fund scheme. With periodic instalments, one can enumerate the savings to be used for investment.

With the help of a SIP calculator, one can presume an expected return on their savings. Using a SIP calculator is quite simple. All one needs to do is to put his periodic investment amount and the investment period. The SIP calculator will then calculate an approximate amount you will have as a return on your investment.

If you’re looking for a reliable SIP calculator, we suggest using the SIP calculator by Scripbox to know about your estimated returns on your investments.

Different Types Of SIPs

There are basically four types of Simple Investment Plans. Let’s take a brief look at each of them:

1. Top-up SIP: Top-up SIP allows the benefit of increasing the investment amount periodically. This is helpful in investing in only those mutual funds which are performing better. Since the amount is increased periodically, one can make a large chunk of investment in a later period.
2. Flexible SIP: In this SIP, one is entitled to increase or decrease the investment amount on the basis of his cash flow. If an individual is running on the profit, he can invest more in the mutual fund scheme and if not, can even do away with a payment or two.
3. Perpetual SIP: When someone makes a mutual fund investment, he either does it with a timeline: be it a year, two or three. However, he also has the option to go along with no end date whatsoever. In this case, he will be allowed to redeem his funds as and when necessary.
4. Trigger SIP: In a trigger SIP facility, an investor can withdraw full or part of an amount when it reaches a pre mentioned trigger point. He can also switch to another investment scheme upon reaching this trigger point. This SIP helps in coping up with the unstable financial market.

Advantages Of SIP

1.    Proper management of funds: Choosing a suitable SIP allows the individual to take advantage of investing funds in a disciplined manner. With a regulated payment based on fixed periods, an individual can accumulate his savings in the like manner.

2.    Benefit in the long run: SIP is specially made to serve the investor in the long run. The profits to be accrued on the investment take a longer time because the investment amount is generally smaller in the initial period. That is why it is recommended to start investing early in SIP to reap its prime benefits. You can calculate your expected returns using a SIP calculator.  

3.    Minimal Risk: Many investors cannot afford to invest a lump sum at once. The large deposited amount also implies greater risk. SIP is helpful in this case. With a moderate investment and better than average returns, the investor has to go through a minimal risk only.

4.    Flexibility in investment: Though it is recommended to invest in SIP keeping in mind the long term goals, this does not deprive an investor to withdraw the current amount on his convenience. With no mandatory fixed time, the investor is free to exit the plan any time.

5.    Relaxation from taxation: One of the most lucrative factors of SIP is the tax relaxation it offers. An investor gets exemption or tax deduction in the investment sum, in the interest earnings and during the time of withdrawal of the investment funds.

6.    Higher Returns: Compared to other deposit schemes like fixed deposits (FD), SIP returns are much better. It keeps adjusting with the fluctuating market and does not limit the income to a fixed rate of interest. However, it may also happen that there is a decrease in returns due to the financial market running on low. A SIP calculator significantly helps in estimating returns before you invest, so that you know exactly which investment will yield better returns.

How To Pick The Best SIP For Yourself

There are many things to keep in mind while opting for the best SIP plan. Some of them are given below:

1.   Ratings From Mutual Funds

Credit rating agencies such as CRISIL, ICRA, CARE, BWR and others rate various mutual fund schemes. A potential investor would do well to go through the scheme ratings of these agencies to make the first step in the right direction.

2.   Performance History

The performance history of a mutual fund scheme implies how it has performed so far in terms of providing returns to the investors. Though the future performance may turn out to be radically different from the past, nevertheless, performance history provides an edge to effective speculation.

3.   Asset Under Management

Asset Under Management or AMU is the total value of the assets the investing company has for a mutual fund scheme. 500 crore asset size companies are generally considered safer benchmark options to invest the funds in. Their chances of better returns exceed that of those which are below it. But of course, this can never be a surety. Hence, using an pre-planning and estimating your returns using an SIP calculator are considered best practices in order to begin with the risk mitigation process with respect to investments.

Best SIPs to choose From In 2020

We have selected some of the best mutual fund plans for you to invest in the year 2020:

1.    Axis Bluechip Fund Direct Plan

2.    ICICI Prudential Bluechip Fund

3.    Canara Robeco Bluechip Equity

4.    SBI Bluechip Fund

5.    Motilal Oswal Multicap 35 Fund

6.    Kotak Mahindra Multicap Fund

7.    Aditya Birla Sun Life Equity Fund

Top 7 Mutual Funds To Pick From In Year 2020

 (Analysed on the basis of average returns during 30th November 2019

*VR - Value Research 

Therefore, do not delay a moment if you are planning on gaining excellent returns from the Simple Investment Plans of mutual funds.  Use a SIP calculator to compute your suitable investment and the expected returns you would be having from it. The earlier and the longer you invest, the greater your margin of returns will be, which can be easily estimated at the start by using a SIP calculator.