Best SIP Plans for 3 Years: Top Picks & Expert Tips

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16 MAY, 2024

Investing in the best SIP plan for three years requires careful consideration and evaluation of various factors. A 3-year investment period is relatively short in investments, and maximising growth within this timeframe is crucial. Let us explore the best SIP plans to invest for three years and other important information.

How to Select the Best SIP Fund for 3 Years?

To select the best SIP fund for a 3-year investment timeframe, follow a step-by-step guide encompassing thorough research methods and evaluation criteria.

Begin by identifying your financial goals and risk tolerance, as they will guide your selection process. Next, conduct extensive research on different SIP funds available in the market. Analyse historical performance, fund manager expertise, expense ratios, and investment philosophy.

Assessing the fund's asset allocation strategy and the sectors it invests in is also crucial. Look for consistency in performance and a track record of delivering returns in line with your investment objectives. Further, consider the fund house's reputation and credibility in the industry. Once you have shortlisted a few SIP funds, evaluate their expense ratios and compare them with industry benchmarks.

Lower expense ratios can result in higher returns over time. Finally, review the fund's exit load and lock-in period to ensure they align with your investment horizon.

Factors to Consider Before Choosing SIP Plans

Risk tolerance, financial goals, investment horizon, and historical performance are important factors. Let us look at these one by one.

Risk Tolerance Assessment: Before choosing an SIP plan for a 3-year investment, it is essential to assess your risk tolerance. This involves evaluating your comfort level with market volatility and potential return fluctuations.

Financial Goals and Objectives: Aligning SIP choices with your personal financial goals and objectives is vital for a successful investment strategy. Determine your short-term and long-term financial goals, such as buying a house, funding education, or planning for retirement.

Investment Horizon Analysis: Considering the investment horizon is crucial when selecting SIP plans. A 3-year time frame is relatively short-term, and choosing funds suitable for this duration is important. Shorter investment horizons may require a more conservative approach to minimise the impact of market volatility.
Historical Performance of SIP Funds: Analyse the historical returns of different funds over three years and compare their performance with industry benchmarks. Look for funds that have consistently outperformed their peers and delivered stable returns over time.

Benefits of Investing in a SIP for 3 Years

Investing in the best SIP plan for 3 years can provide potential returns, encourage disciplined investing, distribute risk, offer flexibility and liquidity, and leverage professional fund management.

Potential Returns: Investing in SIPs for 3 years can offer attractive returns, especially when invested in well-performing funds. Over time, the power of compounding can significantly impact your investment, providing growth opportunities.
Disciplined Investing: SIPs promote discipline and regularity in investments. By investing a fixed amount at regular intervals, you develop a habit of saving and investing consistently, regardless of market conditions.
Risk Distribution: Investing in SIPs allows for risk distribution. Instead of investing a lump sum amount, SIPs enable you to spread your investments over a period, reducing the impact of market volatility. This strategy minimises the risk of investing during market highs and lows, resulting in a more balanced and potentially stable investment portfolio.
Flexibility and Liquidity: SIPs offer flexibility, allowing you to choose the investment amount and frequency based on your financial capability. Additionally, SIPs provide liquidity, allowing you to redeem your investments partially or entirely, if needed, without any major penalties or exit loads.

How to Start Investing in SIP for 3 Years?

Choosing the Right Fund House: Look for established fund houses with a strong track record and experienced fund managers. Evaluate their past performance, investment philosophy, and the range of funds they offer.
Online Platforms for SIP Investment: Online platforms have revolutionised how we invest in SIPs. These platforms provide a convenient and user-friendly interface to start, manage, and track your SIP investments. They offer funds from various fund houses, allowing you to compare and choose the best SIP plan for 3 years.
Documentation and KYC Process: This process involves providing proof of identity, address proof, and other essential details. Many fund houses and online platforms facilitate online KYC registration to simplify the process, allowing you to complete the documentation seamlessly and quickly.
Setting up SIP Auto-Debit Instructions: Automating your SIP investments through auto-debit instructions is a convenient way to ensure regular and timely investments. You can set up auto-debit instructions with your bank and link them to your SIP account. This way, the predetermined amount gets automatically debited from your bank account at regular intervals, eliminating the need for manual transactions.

Top SIP Plans for 3-Year Investment

Canara Robeco Bluechip Equity Fund has shown a commendable performance with a 5-year return of 16.04% and a 1-year return of 18.45%. The fund charges a relatively low exit load of 1% if redeemed within 1 year and has an expense ratio of 0.58%, making it an attractive option for investors looking for stability and performance in the large-cap space.
ICICI Prudential Value Discovery Fund stands out with a 5-year return of 18.24%, significantly higher than its peers. Despite a slight dip in the short term, its long-term performance, with a 3-year return of 24.29%, showcases its potential for value discovery in large-cap stocks. The fund has a moderate expense ratio of 0.36%.
Canara Robeco Flexi Cap Fund has demonstrated a solid performance with a 5-year return of 16.19%. The fund's flexibility in allocation between large, mid, and small-cap stocks, combined with a low expense ratio of 0.62%, makes it a viable choice for investors seeking diversified exposure.
Franklin India Focused Equity Fund has an impressive 5-year return of 17.96%, with a notable 1-year return of 30.23%. This fund focuses on a concentrated portfolio, which has helped it achieve significant gains, particularly in the short term. The expense ratio is 0.31%.
HDFC Large and Mid Cap Fund presents an attractive 5-year return of 18.97%, the highest among the multi-cap funds listed. Its balanced approach between large and mid-cap stocks and a high 1-year return of 31.21% positions it well for investors looking for growth. The expense ratio is 0.50%.
Kotak Equity Opportunities Fund has a 5-year return of 18.49%, focusing on capitalising on opportunities across the market cap spectrum. Despite a slight dip in the short term, its overall performance and a moderate expense ratio of 0.46% make it a solid choice.

Frequently Asked Questions

Q: Which is the best SIP for 3 years?

A: The 'best' can vary. However, some options include Equity Funds, Debt Funds, and specific schemes.

Q: What is the minimum investment amount for SIPs?

A: The minimum investment amount for SIPs can be as low as Rs. 500 per month, but this varies among asset management companies.

Q: How are returns from SIPs taxed for a 3-year investment?

A: For equity funds, short-term capital gains (held for less than one year) are taxed at 15%. Long-term capital gains (held for more than one year) up to Rs. 1 lakh are tax-free, and gains above this limit are taxed at 10%.

Q: Which SIP gives a 40% return?

A: A 40% return on an SIP is quite high and not guaranteed. Returns depend on market conditions and the specific fund chosen. Always consider your risk tolerance and financial goals when investing.

Q: What if I invest 5000 a month in SIP for 3 years?

A: The final corpus will depend on the returns provided by the chosen SIP. Remember, the performance of an SIP depends on the type of fund (equity, debt, etc.) and market conditions. It's always recommended to consult with a financial advisor or do your own research before investing.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.

Best SIP Plans to Invest for 3 Years