Global equity markets are reaching record highs which have made many seasoned investors wary of increasing their exposure to capital markets. The situation is a bit more complicated in India as on the one hand, we have the situation of falling interest rates while on the other hand India's capital markets are significantly underdeveloped as compared to that of many developed countries. As a result of this underdevelopment, it is only natural that actively managed mutual funds in India are in a position to post potentially high returns in the long term.
While there are a range of tactics that mutual fund investors can choose to utilise in order to get the most out of their investments, SIP or systematic investment plans have emerged as a popular investment style especially among new investors. The use of best SIP plans to make mutual fund investments is definitely not new and this option available in case of all types of funds whether they belong to the equity, debt or hybrid category.
However, in case you are seeking potentially high returns from your mutual fund investments, equity schemes are by far your best bet. That said, though the highest returns in the category might be obtained from small and midcap equity investments, just putting the previous performance data in a SIP calculator does not serve as a good way to choose your investment. It is a much better idea to go for a SIP in a multicap equity fund which offers superior balance of risk and returns to the investor. In the following sections, we will discuss some of the top mutual funds suitable for making investments via the SIP route.
Franklin India High Growth Companies Fund
Franklin India Mutual Fund AMC, the Indian arm of the globally recognized financial behemoth Franklin Templeton, is among the top fund houses operating in India. The Franklin India High Growth Companies Fund is a diversified equity fund which invests in a variety of equity schemes irrespective of market cap or industry. The primary goal of this scheme is to provide investors with capital appreciation through equity investments made into companies that have superior growth potential while providing a balance between returns, valuation and risk. Some of the key criteria that this scheme utilizes in order to select its equity investments include discounted earnings per share, forward sales/prices, growth/earnings/price, growth rate and enterprise value. Historically this multi-cap fund has dynamically changed its equity allocations based on changing market conditions. At present, this equity scheme has shown a large cap bias with an estimated 65% of the portfolio comprised of large cap investments with mid cap and small cap investments accounting for the remainder of the portfolio.
Tata Equity PE Fund
Tata Mutual Fund AMC might not be as noticeable as many of its peers however with its diversified equity scheme, the Tata Equity PE Fund, have emerged as a top choice for SIP plan investments in the diversified equity funds category. The chief objective of this scheme is to provide capital appreciation by investing an estimated 70% of its investable assets in stocks featuring a price to earnings (P/E) ratio less than that of the BSE Sensex. In recent years, this scheme has featured a distinct large cap bias with large cap equities accounting for an estimated 65% of its total investments with mid and small cap equities making up the remainder. This scheme's investment style is best classified as blended i.e. featuring a balance between growth and value-based investments. At present this is definitely one of the best diversified mutual funds for investors seeking potentially high capital appreciation from SIP investment in equities.
Aditya Birla Sun Life Advantage Fund
Aditya Birla Sun Life Advantage Fund is the premium multicap equity fund offered by Aditya Birla Sun Life Mutual Fund AMC, a leading fund house in India. This mutual fund scheme is designed to provide investors with capital appreciation over the long term with only moderate levels of risk. The scheme has till date made diversified investments with special emphasis on the identification of companies with high future growth potential and efficient management. Being a diversified equity fund, this scheme has the option of creating dynamic variations in its large, mid and small cap allocations to derive the greatest benefit from changing market conditions. However, in recent times, this fund has shown a higher degree of affinity for large cap investments which currently account for about 68% of the scheme's total portfolio. The high rate of return provided by this fund can easily be ascertained by input of key funds data into a free SIP calculator.
SBI Magnum Multicap Fund
SBI Mutual Fund AMC, a JV between SBI and GE Capital, is one of the most well known mutual fund houses in India and SBI Magnum Multicap Fund has been one of the top performers in the category since its launch. If you invest in a SIP plan of this diversified equity fund, you can look forward to potentially high long term capital appreciation on your investments through equity investments that feature moderate levels of risk. This scheme is officially required to invest between 50% to 90% in large cap, an additional 10% to 40% in mid-cap and no more than 10% in small cap equities. At the time of stock selection, some of the key criteria used by this scheme include potential for future growth, management effectiveness, capital efficiency as well as compounding ability. In recent times, the large cap allocations made by this scheme have ranged between 45 to 55% along with mid-cap and small cap allocations of between 25% to 35% and 15% to 20% respectively. Though this shows the scheme to be overweight in mid and small cap investments while being underweight in large cap investments as compared to its peers, this seems to have worked in the scheme's favour and allowed the fund to outperform most of its peers.
DSP BlackRock Opportunities Fund
The DSP BlackRock Opportunities Fund is a diversified equity scheme with the primary objective of wealth creation in the long term with the secondary objective of income generation/dividend distribution. In order to achieve its stated objectives, this scheme is expected to invest in a portfolio comprised of diversified equities as well as equity-based schemes. The main objective of this diversified equity mutual fund is to outperform traditional equity schemes through a highly diversified portfolio that minimises overall investment risk. This scheme has no specified or pre-determined limits with respect to investments made across various market capitalisations. Thus the fund manager has the flexibility to change portfolio allocations depending upon changing market conditions. If you invest into this scheme using a SIP plan, you can look forward to outperformance with respect to most of the scheme's peers. However what's probably most remarkable is that the fund hedges its bets and mitigates overall portfolio risk to a large extent by keeping single stock investment exposure to below 10%, while the cash levels maintained by this scheme are capped at 7.5%.
The above investment options have been chosen on the basis of their previous performance as well as their future prospects. However, you should keep in mind that equity investments can provide the best returns when you are investing for the long term. Also it will serve you well to bear in mind that prior performance of mutual funds does not guarantee future performance as these are market linked investments and future market direction cannot be predicted accurately. That's said, the above funds provide a balance of risk and potential returns that is definitely significantly better than most of its peers.