What are the best equity mutual fund categories for SIPs  | Motilal Oswal
What are the best equity mutual fund categories for SIPs  | Motilal Oswal

Best equity mutual fund categories for SIPs

Equity mutual funds are schemes that invest a minimum of 65% of the total asset value in equity. These schemes invest in company stocks across different market capitalizations. For making the most of your equity mutual funds, you need the right investment approach. This is where a systematic investment plan, or SIP, comes into the picture. Many consider investing in SIPs a better investment strategy as compared to a lump sum investment. Essentially, SIPs involve investing a fixed sum at regular intervals over a certain duration, and this can be done on a hassle-free auto-deduction basis. Depending on your investment horizon, different equity mutual funds will suit your SIP differently. Read on to know which is the best equity mutual fund category for your systematic investment plan

Best Equity Mutual Fund Categories for Your SIP 

Here are the most suitable equity mutual funds for your SIP, considering factors like your investment horizon and priorities:

  • Large-Cap Equity Mutual Funds:

For long-term financial goals, investing in large-cap equity mutual funds is the way to go. These funds invest in the top 100 ranking companies in the market that have a reliable financial record, large market capitalization and are likely to remain stable over longer durations. Thus, these schemes offer relatively low risk, sustainable and sizeable returns in the long term. 

  • Mid-cap Equity Mutual Funds: These schemes invest in younger companies that fall in the 101-250 ranks in the market. These stocks are riskier and they trade at lower prices than large-cap stocks. However, they have greater earning growth potential than large-cap stocks and can become large-cap in the future. Thus, in the long term, they can potentially bring more returns than large-cap funds.
  • Hybrid Funds: Hybrid mutual funds invest in multiple asset classes, of which equity and debt is a popular combination. Hybrid funds typically carry lower risk than equity and give moderate returns. Hence, they are suitable for medium-term goals.
  • ELSS Mutual Fund: Equity-Linked Savings Schemes invest primarily in equity. According to section 80C of the Income Tax Act, investments up to Rs.1.5 lakhs under this fund are eligible for tax deductions. Compared to other tax-saving schemes, the ELSS lock-in period of 3 years is the shortest. Although keeping this fund for longer can bring better returns, you can also choose to sell your investment after the lock-in period to fulfil your short or medium-term goals.

To Sum It Up

Today, there is a huge variety of investment options in the market. As an investor, you will have your own unique preferences, risk tolerance and investment horizon. In order to get the best out of your systematic investment plan, it is key that you choose equity mutual funds that align with your goals. Fortunately, there are many handy tools and resources online that cater to your investment needs. You can now browse the best equity mutual funds in India, invest in SIPs and buy other mutual funds online with just a few clicks. 

Related Aritcles:

How to Analyse Mutual Funds for Big Returns | Things to Know Before Investing in Mutual Funds | Mutual Fund - Need of Financial Plan | How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account 

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