10 Things to know before finding best mutual funds for SIP

Do you have any specific investment goal in your mind.

Select the right asset class to achieve your financial goal with right scheme for your SIP.


Why do you want to start a mutual fund SIP? You have started investing in mutual funds through SIP, but do you have any specific investment goal in your mind. Most investors choose a mutual fund to invest their money to save taxes. People usually invest in different instruments without any specific investment goal in mind. So, they redeem it whenever in need of money. They want to save taxes for the surplus money in their bank account. Some investors start it because their friends invest in mutual funds.  So, most of them start their investing journey without any specific goals in mind. Read this article to know the things before finding the best mutual funds for SIP.

1. Know your investment goal

Before investing money in SIP, you must know why you are investing for. Mutual funds can do much more than just saving your taxes. You can achieve many of your coveted financial goals through this investment. So, fix a strong financial objective in mind before investing in SIP. You can invest money for the higher education or marriage of your child or retirement. Such clear financial goals help you to get a direction to follow. Besides, it gives you an idea about the right fund to choose and the amount to invest.

2. Know the value of your financial goals

Having a few financial goals is not just enough to be a good mutual fund investor. You must also know the actual value of your objective at present and how it will become in the future. Attach a money value to your financial objective helps you to understand what the cost of the goal at present and what it is likely to be in the future. It also helps you to determine when you can fulfill your desired goal. If you invest money in SIP keeping your child’s higher education in a foreign university, the corpus you required as per the present value is 30 lakhs. The future value of it will be nearly 44 lakhs, considering the inflation at the rate of 7.5%. So, you must keep the value of 44 lakhs in mind while investing money in a mutual fund.

3. Choose the right investment horizon

Before you invest in mutual funds, you also ask questions like you want short-term, medium-term, or long-term investment goals. Short-term goals have a small investment horizon, while medium-term options have an investment horizon of three to five years. Long-term mutual funds have a long investment horizon of five years, ten years, or more. You can decide whether the investment that you make at present can achieve the required corpus in future value by defining the investment horizon.

4. Select the right asset class to achieve your financial goal

Asset allocation is important in mutual funds to determine your returns. Choose the right asset class for investing in mutual funds rather than selecting individual funds. The advantage of this investment instrument is that it helps you to select from Equity funds, Liquid funds, and Debt funds, and the asset class that you choose will determine the future value of the corpus.

5. Choose the right scheme for your SIP

Before investing in a mutual fund SIP, it is important to choose the right scheme for the investment. A diversified equity scheme is a good suggestion for consistent performance for medium-term or long-term investment. The Asset management company that you choose must have a reputation in the market. You must also consider the track record of the fund manager for managing the funds before choosing the right fund for investing.

6. Get an idea about SIP amount

You must get an idea about the future values of your monthly SIP investments before investing in mutual funds. The future value of your investment could vary due to different reasons like the changes in the rate of returns over a period of time. It is important to invest the right amount in SIP in order to reach your financial goals.

7. Choose the SIP date and the Bank carefully

Choose a convenient SIP date for investing in your money. Most people neglect the SIP date and the bank to choose while investing in mutual fund SIP. If you have a regular income, have your SIP date for debiting the money within the first week after crediting your money.

8. Get an idea about different mutual fund types available

Mutual funds offer different types of schemes suitable for all kinds of investors. Mutual funds offer different types of schemes suitable for all kinds of investors. Some of the mutual fund types available are Equity Mutual Funds, Debt Mutual Funds, Balanced Funds, and ELSS or Tax Saving Mutual Funds. Choose the right mutual fund suitable for your risk appetite for making the best investment for your SIP.

9. Entry and Exit Load of the scheme

You have to get an idea about the exit load the fund houses charges if you redeem your SIP units before its maturity. Investors can get an idea about the exit load on the application form. The information is also available on the Key Information Memorandum (KIM). The Securities and Exchange Board of India (SEBI) stopped the levying of entry loads from fund houses on any schemes of the mutual fund.

10. Know the expense ratio of the scheme

Another thing to consider before investing money in your mutual fund SIP is its expense ratio. The expense ratio is the annual fee charged to a mutual fund scheme that comprises of the fund management fee, administrative costs, and brokerage charges. If your mutual funds have higher assets for management, then it can be a lower expense ratio.

Mutual fund SIP helps investors to generate good returns by investing small amounts over a period of time. It becomes a popular investment plan due to its ease of investment and high returns that it offers. However, considering the above things before investing in mutual funds helps you to make the right investment decision. It helps you to choose the right mutual fund scheme based on your risk appetite. Being a long-term commitment, it is wise to check whether you are comfortable with the amount you will be paying as SIP each month.

That’s why Comparte Investment team asks do you have “Nivesh Ki Aadat”.

With this one can say “Mutual Fund Sahi hai”, so let me do Nivesh / Enquire