ULIPs and mutual funds are two popular yet distinct investment avenues, each coming with its unique set of benefits and drawbacks. Know which one is better for your individual needs and preferences.
Short for Systematic Investment Plan, SIP is a method to invest your money in a mutual fund scheme via regular and periodic contributions. What’s interesting about SIPs is that you can make small investments every month and make excellent gains in wealth over time.
With the help of SIPs, you can achieve your financial goal in the long run. However, if required, you can also invest in mutual funds via SIP for the short term. If you are looking to accomplish immediate financial goals such as purchasing a new car or house or arranging funds for marriage, you can certainly turn towards any of the best SIP plans for 5 years.
If you want to understand how these SIPs work, their benefits, how to get the best SIP for 5 years, things to consider before getting this plan, and more, let’s go through the article below.
An SIP plan for 5 years is a goal-oriented plan that directs a portion of your money towards a set mutual fund scheme. The investments are made in large-cap equity funds so that you can receive long-term capital appreciation. You can channelise at least 80% of your SIP investments towards these assets. Some of the best SIP for 5 years also make investments in index funds.
When you invest in the best SIP plans for 5 years, you lock in your funds for the set duration. With the help of compounding, the investments multiply to provide you with considerably high returns over time.
Take these aspects into consideration before investing in SIP plans for 5 years -
Discussed below are the types of SIPs that you can choose from to invest in mutual fund schemes to earn high SIP returns in 5 years –
When you plan to make SIP investments for 5 years, it is necessary to understand the type of mutual funds that you can invest in. These types can be classified according to various characteristics.
The following are the types of funds where you can use SIP to get high SIP returns in 5 years -
Here are the types of mutual funds as per the asset class –
Equity Funds - It is one of the best SIP for 5-year investment options. Under equity funds, the contribution is invested in stocks. The funds are pooled from various investors from diverse backgrounds and are invested in shares or stocks of top-performing companies. Equity funds can provide you with high SIP returns in the next 5 years.
The following are the types of equity funds you can invest in –
Large-Cap Equity Funds - You can make investments in large-cap equity funds to get the expected returns in a short span. Your SIP contributions will be invested in well-established companies that have commendable market performance and are known to offer stable returns over time.
Mid-Cap Equity Funds - The mid-cap equity funds invest at least 65% of the funds in companies that have relatively moderate market capitalisation. Although more volatile than large-cap funds, they can generate better SIP returns in the next 5 years than the latter.
Small-Cap Equity Funds - Here, the funds are invested into the equity shares of small-cap companies. These equity funds, while potentially having excellent SIP returns in 5 years, are significantly more volatile than large-cap and mid-cap equity funds.
Debt Funds - To get good SIP returns in 5 years, you can contribute to medium-term debt funds as well. A debt fund disburses money in a number of securities as per their credit ratings.
Since you plan to make the best SIP investment for the next 5 years, you can invest in funds like dynamic bonds funds. In comparison with a 5-year bank FD, these debt bond funds provide higher SIP returns in 5 years.
You can consider the following types of debt funds –
Dynamic Bond Funds - In these types of debt funds, the fund manager modifies the portfolio composition based on the altering interest rate pattern. You can make long-term, medium-term, or short-term investments in these types of funds.
Income Funds - Like dynamic bond funds, income funds also operate according to interest rates. However, they are more stable than dynamic bond funds. The maturity period of these debt funds is around 5-6 years.
The structural classification of mutual funds is broad, and the varying factor is the flexibility to purchase and sell individual fund units. The following are the mutual funds you can invest in for maximum SIP returns in 5 years –
Open-ended Funds - When you invest in open-ended funds, there is no constraint on the number of transactions you make in the funds unit. These funds allow you to trade funds at your convenience and exit when required at the prevailing Net Asset Value level. This is why the unit capital changes continuously with every new entry and exit.
Index Funds - Suitable for passive SIP investors, index funds are usually managed by individuals themselves and do not require any professional management. The money is invested in market indexes. The funds recognise stocks and their associated corresponding ratio in the market index. These funds cannot outperform the market but imitate the index performance, which has generated good returns over time.
Given below are the major benefits of investing in the best SIP plans for 5 years –
Some of the reasons why investors can opt for the best SIP for 5 years are purchasing a new car or house, arranging funds for marriage, and more. These systematic investments are goal-oriented and often require the investors to invest in mutual funds like equity funds, debt funds, index funds, and open-ended funds.
There are three major ways you can invest in mutual funds via SIP to get maximum SIP returns in 5 years, with these SIP types being flexible SIP, top-up SIP, and trigger SIP. When you invest in mutual funds using the best SIP for 5 years, you create a balance of both wealth generation and liquidity.
To know more about SIP for 5 years, go through the FAQ section below:
Ans: You can invest in flexi-cap mutual funds using the best SIP for 5 years. These are equity mutual funds that invest in stocks irrespective of market capitalisation and the sector the funds are in. These funds can help you diversify your portfolio and reduce the risks.
Ans: SIP investments for 5 years are suitable for people who have a high-risk appetite and want to generate wealth in a short period. The reason for investment could be purchasing a car or starting a new business soon.
Ans: Listed below are the reasons to invest in mutual funds using SIP –
Ans: SIP is a technique to invest in mutual funds and not a mutual fund or the market instrument itself. It is an investment method where you regularly invest your funds in a mutual fund scheme.