Categories: Mutual Fund

Top 10 Best SIP Mutual Funds to invest in India in 2018

In this article, I will share my Top 10 Best SIP Mutual Funds to invest in India in 2018. Yearly I will publish my Top 10 Best SIP Mutual Funds to invest in India. Continuing that trend, I will publish the list for 2018.

Before proceeding further, let us first analyze the funds of Top 10 Best SIP Mutual Funds to invest in India in 2017. Do remember one thing that due to continues market uptrend, the majority of equity funds performed well and given you better returns.

However, my concern is always to go for a fund which is old, went through all market cycle, given you consistence performance and also with downside protection.

Notice that few funds since a year not able to beat the benchmark index. However, they have easily beaten the benchmark if you look at 3 yrs, 5 yrs or 10 yrs returns. Hence, you no need to worry in this front.

Why I have to invest?

Before a BLIND investment, it is always best that you must know the reason for your investment. Hence, before jumping into investment read what I am sharing below.

You must have a proper Financial Goal

I noticed that many of investors simply invest in mutual funds just they have some surplus money. The second reason may be someone guided that mutual funds are best in long run compared to Bank FDs, PPF, RDs, or even LIC endowment product.

If you have clarity like why you are investing, when you need money and how much you need money at that time, then you will get the better clarity in selecting the product. Hence, first identify your financial goals.

You must know the current cost of that particular goal. Along with that, you must also know the inflation rate associated with that particular goal. Remember that each financial goal to have it’s own inflation rate. For example, education or marriage cost of your kid’s is different inflation that the inflation rate of household expenses.

By identifying the current cost, time horizon and inflation rate of that particular goal, you can easily find out the future cost of that goal. This future cost of the goal is your target amount.

I have written a separate post on how to set your financial goals. Read the same at “Financial Goals – How to set before jumping into investing?”

Asset Allocation is MUST

Next step is to identify the asset allocation. Whether it is short-term goal or long-term goal, the proper asset allocation between debt and equity is a must. I personally prefer the below asset allocation. Remember that it may differ from individual to individual. However, the basic idea of asset allocation is to protect your money and smoothly sail to reach the financial goals.

If the goal is below 5 years-Don’t touch equity product. Use the debt products of your choice like FDs, RDs or Debt Funds.

If the goal is 5 years to 10 years-Allocate debt:equity in the ratio of 40:60.

If the goal is more than 10 years-Allocate debt:equity in the ratio of 30:70.

While choosing debt product, make sure that the maturity period of the product must match your financial goals. For example, PPF is best debt product. However, it must match your financial goals. If the PPF maturity period is 13 years and your goal is 10 years, then you will fall short of meeting your financial goals.

Return Expectation

Next and the biggest step is the return expectation from each asset class. For equity, you can expect around 10% to 12% return. For debt, you can expect around 7% return expectation.

When your expectations are defined, then there is less probability of deviating or taking knee-jerk reactions to the volatility.

Portfolio Return Expectation

Once you understand how much is your return expectation from each asset class, then the next step is to identify the return expectation from the portfolio.

Let us say you defined the asset allocation of debt:equity as 30:70. Return expectation from debt is 7% and equity is 10%, then the overall portfolio return expectation is as below.

(70% x 10%) + (30% x 7%)=9.1%.

How much to invest?

Once the goals are defined with target amount, asset allocations is done, return expectation from each asset class is defined, then the final step is to identify the amount to invest each month.

There are two ways to do. One is constant monthly SIP throughout the goal period. Second is increasing some fixed % each year up to the goal period. Decide which suits best to you.

Hope the above information will give you clarity before jumping into equity mutual fund products.

How many mutual funds are enough?

How many mutual funds do we have? Is it 1, 3, 5 or more than 5? The answer is simple…you don’t need more than 3-4 funds for investing in mutual funds. Whether your investment is Rs.1,000 a month or Rs.1 lakh a month. With the maximum of 3-4 funds, you can easily create a diversified equity portfolio.

Having more fund does not give you enough diversification. Instead, in many cases, it may create you portfolio overlapping and leads to underperformance.

Now let us move to the selection of mutual funds.

Taxation of Equity Mutual Funds for 2018-19

Remember that Equity Funds and Debt funds are taxed differently. Hence, you must understand the taxation part as well before jumping into investment. I tried to explain the same in below image.

The rate of taxation is as below for the current FY.

 

Below is the DDT Rates applicable to Mutual Funds after the Budget 2018.

 

Hope taxation part is clear to all of you. If you still have doubt, then refer my latest post “Budget 2018 – Mutual Fund Taxation FY 2018-19“.

How I selected Top 10 Best SIP Mutual Funds to invest in India in 2018?

I will first screen the top 15 funds in each category based on their returns to benchmark since inception. The funds who consistently beaten the benchmark are listed in that 15. Once I have the list in my hand, then I select the funds based on Risk-Return Analyzer.

Many simply select the funds based on eye-catching returns. However, at what cost the fund is giving you a better return? To what extent it protects my investment during a downturn is what differentiate from good fund to bad fund.

Again, I am not saying that these 1o funds alone be considered as “Top 10 Best SIP Mutual Funds to invest in India in 2018”. There may be fewer other funds, which are good to compete with these funds. However, I may be biased towards few Mutual Fund Companies (purely on their size and how long they are in MF business in India). Below are the metrics I used to arrive at finally selecting the funds.

If the fund cleared all these tests and given me around a minimum of 80% score since inception, will be added to my list.

  1. Beta-Volatility measure and tell how much the fund changes for a given change in the Index. Lower the beta, lower the volatility. Hence, your fund must have lower beta.
  2. Standard deviation-It tells us how for a given set of returns, how much do fund returns deviate from the average. Lower the standard deviation, lower the volatility. Hence, your fund must have lower beta.
  3. Alpha-It is the risk-adjusted measure. By taking risks, how much the fund manager generated the return over the benchmark. Higher the alpha, higher the outperformance of the fund.
  4. Sharpe Ratio-It is the risk-adjusted measure. Higher the Sharpe ratio, better is the performance.
  5. Sortino Ratio-It is the risk-adjusted measure. Higher the Sortino ratio, better is the performance.
  6. Treynor Ratio-It is also be known as reward ratio. Higher the Treynor ratio, better is the performance.
  7. Information Ratio-This is calculated by average excess return obtained compared to a benchmark and divides it by the standard deviation of excess returns. Higher the information ratio, higher the consistency in beating the benchmark.
  8. Omega Ratio- It is a risk-return performance measure of an investment asset.
  9. Downside deviation-This is also be called as BAD RISK.
  10. Upside potential-This is exactly the opposite of Downside deviation.
  11. R-squared- It is a measure of how correlated the fund’s NAV movement is with its index.
  12. SIP Returns-For how many times the fund’s returns are above the index when we invest in SIP.
  13. Lump Sum Returns-For how many times the fund’s returns are above the index when we invest in a lump sum.

Below are my selection in each category of funds.

Best SIP Mutual Funds to invest in India in 2018 -Large Cap

In this category, there are other funds also which are in my radar like SBI Bluechip Fund, Birla Sunlife Frontline Equity Fund. However, I found no reason to change my last year recommendations. Hence, I am continuing the same funds.

Best SIP Mutual Funds to invest in India in 2018 -Multi-Cap

In this category, I am bit skeptical with ICICI Pru Value Discovery as the fund underperforming since a year. Those who invested in this fund based on my recommendation must continue and watch this fund for another year or so. Along with this, you can check with the fund like SBI Magnum Multi Cap Fund also.

Best SIP Mutual Funds to invest in India in 2018 -Mid Cap

Last year I recommended HDFC Midcap Opp Fund and Franklin India Prima Fund. I am sticking to the same funds in this year also as I have not found any reason to change these funds. You can also have a fund like Mirae Asset Emerging Bluechip Fund.

Best SIP Mutual Funds to invest in India in 2018 -Small Cap

Last year, I recommended DSPBR Micro Cap Fund and Franklin India Smaller Companies Funds. However, DSPBR now not accepting the fresh investments. Hence, those who already have a SIP in that fund may continue in that fund without any worries. Fresh investors can use Franklin India Smaller Companies Fund.

Best SIP Mutual Funds to invest in India in 2018 -Equity Oriented Balanced Funds

Here also I am managing the same funds of last year. No change here also.

 

The final list of Top 10 Best SIP Mutual Funds to invest in India in 2018 are as below.

Conclusion:-You might have surprised that I did not change my funds this year also. Yes, because equity investment does not mean changing fund frequently. However, keeping an eye on fund performance is also a must. The fund I selected are old funds and consistently performed in all market cycles.

You may see some other funds which performed well above these funds. But do remember that during a market uptrend, even the worst fund will generate you BEST returns. The real test of the fund will come into picture when the market starts to fall i.e downside protection.

If the benchmark fell to 20% and your fund has fallen 10 15%, then this is the best fund to me. Because it protected from fall. Hence, always look for consistency and other parameters rather than chasing returns.

Also, before jumping into investment try to refer my GYAAN given about investment. Because I found that many of the blog readers have no clue of why they investing and for how long they have to invest.

Refer our latest posts related to Mutual Funds for 2018-

BasuNivesh

View Comments

  • Hi Basu,

    I have recently started going through your blogs.. Thank you for this useful content.. I have till now read almost 15 to 20 blogs..

    I have few questions. I would very thankful if you could answer them.
    1. You mentioned the 13 parameters/tests for selecting the best SIP mutual funds. Could you explain from where we can get the information for these parameters and how to calculate and assess these parameters..

    2. What are your views on PGIM India Mid-Cap Opportunities Fund? Good to invest or avoid?

    3. Could you prepare blog on Best SIPs for 2022..

    Looking forward to your response.

    Thank you.

    Sneha

    • Dear Sneha,
      Rather than this 2018 post, I suggest you to refer last year post. I will soon publish my new list.

  • Hi Basu,
    I have been following your blog for past few months. Based on your suggestions i have created my goals and asset allocation before investing blindly. I'm planning to invest in mutual funds, so can you please publish top 10 mutual funds for 2019 based on current and past market .
    It will be helpful for me to start my investing journey.
    Thanks for being an eye opener for new investors like me.

  • Hi Basu,

    How are u, contacted you almost 1 year back, Happy a new year 2019.

    I have already investing in the below 3 funds from last year and investing 1000/- each.

    1) [EARLIER BALANCED FUND]-HDFC Hybrid Equity Fund – Direct plan- growth

    (Earlier HDFC Balanced Fund is merged with HDFC Premier Multi-Cap Fund and the same has been renamed as w.e.f. June 01, 2018)

    2) [MID CAP]HDFC MID-CAP opportunities fund-Direct plan growth

    3) [LARGE CAP]ICICI Prudential Bluechip Fund – Direct Plan – Growth

    Below are the questions,can u please clarify

    1—> will HDFC Hybrid Equity Fund comes under balanced funds now?

    2—> I want to invest 1000/ each in below funds from this new year for long term 11 years.
    please suggest me?

    multi cap fund:
    ICICI pru value discovery fund(G)

    small cap fund :
    Franklin india smaller companies fund(G)

    NOTE: I have already investing FD and RD`s for debit portion

    asset allocation as of now is
    debit:equity is 70:30.

    • Dear Karthik,
      1) Yes
      2) Rather than choosing both the funds, stick to either balanced fund or large cap.

      • Thank you Basu for your reply.

        For second question, you mean to say that, I have to continue either HDFC Hybrid Equity Fund or ICICI blue chip, correct?

        If your answer is correct, Shall I stop to invest in HDFC Hybrid Equity Fund and then
        will increase investment in ICICI blue chip and HDFC mid cap opportunity like below i.e

        2) [MID CAP]HDFC MID-CAP opportunities fund-Direct plan growth =====>2000/month

        3) [LARGE CAP]ICICI Prudential Bluechip Fund – Direct Plan – Growth ====> 2000/month

        Is it good?

          • Thank you Basu, I will do as below

            1) HDFC Hybrid Equity Fund ---> I will stop to invest
            (If you want me to stop, Can i know the reason please)

            2) HDFC MID-CAP opportunities fund-Direct plan growth ----> continue with 1000/month, fine?

            3) [LARGE CAP]ICICI Prudential Bluechip Fund – Direct Plan – Growth -----> Increase to 2000 from 1000/month fine?

          • Dear Karthik,
            Yes, go ahead. Regarding the reasons behind stopping HDFC, I want you to have larger exposure towards large cap at first.

          • Thanks Basu for ur time.

            you want me to expose more on large cap.If this is the reason only behind HDFC hybrid stopping,No problem for me to continue in Hybrid

            1) will continue both HDFC hybrid AND HDFC mid cap(1000/month)

            2) will increase investment 2000/month in ICICI large cap

            Is this good? plz suggest

  • Investing in axislongterm, reliance pharma, reliance large cap, Tata digital and Invesco contra fund through monthly sip. Please advice if I need to change any

    • Dear Abhijit,
      First read above post properly and understand how to set goals and asset allocation. Then we discuss.

  • Dear Basavaraj Ji,

    A very well written article. I was thoroughly impressed.

    Can you please guide me in selecting the best Mutual fund.

    Currently I an holding following funds.

    1. Aditya Birla SL Tax Relief 96 Direct-G - 50000.00 (One time).
    2. Axis Dynamic Equity Fund Direct-G - 20000.00 (One time).
    3. DSP Tax Saver Direct-G - 50000.00 (One time)
    4. Franklin India Smaller Companies-G - 1500 (SIP).
    5. HDFC Top 100-G - 2000 (SIP) (Stopped for now).
    6. L&T Infrastructure Direct-G - 4000 (SIP).

    which one should I continue and which one to Stop.

    Also for Debit - I am doing PPF - 20000.00 (Per year).
    Planning to start NPS - 5000 (Per month).

    Kindly Suggest.

    Thanks

    Rajat

    • Dear Rajat,
      First read above post properly (especially before the fund selection part). Then cross check whether you did all those or not. Then we discuss about funds.

      • Dear Basavaraj Ji,

        Sure I have read your article and no doubt it is extensively covered and recommended some good performing funds. Maybe, what I wanted to convey was not covered in the above was,

        My age is 35 years, and Have a target to save 2 Cr for retirement and 1 Cr for child's education. I wanted to know with above fund and gradual increase in same fund will I be able to achieve the target. Also I have a amount of 10000.00 in hand to be invested further.

        Can you please guide me on the same.

        Thanks,

        Rajat

        • Dear Rajat,
          Where is the asset allocation for each goal? What % you are following for each goal? How you selected these funds?

  • Hello Basavaraj Ji,

    Any suggestions or correction regarding trailing MFs

    Emergency Fund Allocation
    Edelweiss Arbitrage Fund-Direct-Growth +Axis Liquid Fund-Direct-Growth

    Short Term (3-5 yrs) Total-3000/-
    Franklin India Low Duration Fund -Direct-Growth 3000/-

    Medium Term (Son Graduation) (15-17 yrs) 12000/-
    Franklin India Smaller Companies fund-Direct-Growth (Small Cap) 4000/-
    L&T mid Cap Fund-Direct-Growth (Mid Cap) 4000/-
    Axis Blue Chip Fund-Direct-Growth (Large Cap) 4000/-

    Long Term (Retirement Allocation (25+yrs) 12000/-
    L&T Emerging Business Fund-Direct-Growth (Small Cap) 4000/-
    HDFC Midcap Opp. Fund-Direct-Growth (Midcap) 4000/-
    Aditya Birla Sun Life Equity Fund-Direct-Growth (Multicap) 4000/-

    Checked with common stocks and portfolio overlap (approximately 4-5 % )
    Equity & Debt ratio – 70:30
    As the time duration is more have included midcap,small cap and multicap in the portfolio

    Appreciate your effort and good work, Thanks in advance.

    • Dear Nitin,
      Reduce your small cap and mid cap exposure. Also, even for your long term goals, you must include debt portion in right proportion.

      • Thank you for your valuable reply, could you please confirm by reducing small cap and mid cap are you referring to reduce it by more 2000/- in each and include debt portion in right proportion like an Aggressive Hybrid Fund like HDFC Hybrid Equity Fund

        So if I understand correctly it will be

        Medium Term (Son Graduation) (15-17 yrs) 12000/-

        Franklin India Smaller Companies fund-Direct-Growth (Small Cap) 2000/-
        L&T mid Cap Fund-Direct-Growth (Mid Cap) 2000/-
        Axis Blue Chip Fund-Direct-Growth (Large Cap) 4000/-
        HDFC Hybrid Equity Fund-Direct-Growth (Aggressive Hybrid Fund ) 4000/-

        Long Term (Retirement Allocation (25+yrs) 12000/-
        L&T Emerging Business Fund-Direct-Growth (Small Cap) 2000/-
        HDFC Midcap Opp. Fund-Direct-Growth (Midcap) 2000/-
        Aditya Birla Sun Life Equity Fund-Direct-Growth (Multicap) 4000/-
        HDFC Hybrid Equity Fund-Direct-Growth (Aggressive Hybrid Fund ) 4000/-

        Please correct me if I am wrong (reducing small & midcap & including debt portion in right proportion)

        • Dear Nitin,
          First refer above post for asset allocation. Second, do you feel HDFC Hybrid Fund a debt fund?

          • Yes, already referred the above post (70:30 equity:debt asset allocation), however as there was no suggestion in Debt fund in your reply so replied my selection/option, could you please suggest on debt fund seeing the above portfolio and goal

            Thanks in advance.

          • Dear Nitin,
            For debt, you can use EPF (for retirement), PPF (for goals which are beyond 15 years), Liquid Funds or Ultra Short Term Debt Funds.

          • Thank you..as shared above already included them in my portfolio

            Liquid Fund -Axis Liquid Fund-Direct-Growth

            Ultra Short Term Debt Funds-
            Franklin India Low Duration Fund -Direct-Growth

            Appreciate your reply. Will continue to follow your articles, Q & A via http://www.basunivesh.com

  • Hi Sir,

    What are your views on ICICI Prudential value Discovery? I started investing in it on march 2016 and have my sip running till date. I have started this investment for a long term of 7 years.

      • Dear Sir,
        It had been underperforming both during last year's bull run and this year. Also its top most holding sun pharma fell 8% yesterday.

        • Dear Vignesh,
          If as per your the fund is consistently underperforming its benchmark, then simply switch to another fund.

  • I had invested in sip in ABSL top 100 since 1 year. At that time both top 100 and frontline equity were classified as large cap. Now there are some who are top 100 is changed to focussed equity and categorised seperately(according to some sites). Do you suggest a change over to frontline equity?

    • Dear Suresh,
      What prompted you to go for ABSL Top 100? Don't rely on few sites categorization. Rather check with ABSL AMC portal regarding detailed portfolio.

      • why is it that some of the top rated funds are giving "bottom of chart" returns when compared to their peers in same category over last one year? One can expect minor variations but most of the top rated funds across categories are in red with negative returns.

        Will your next year fund suggestion take into account the recent sebi reclassification?

        • Dear Suresh,
          No fund will remain TOP rated forever. It has to undergo certain ups and downs. But it does not mean we neglect the performance and retain. If the fund is underperforming consistently then you can move out. Yes, my next year recommendations also involve the recent changes.

  • Dear Mr. Tonagatti,
    Greeting!! Hope you are doing well.
    I am belongs to low income bracket and can only invest 1000 to 1500(Max 2000 if I push) monthly for my retirement money hence I want to invest another 25 years.
    Also from my conventional investment(FD,RD) I managed to save Rs. 1,70,266 from my last 9 years income for my retirement.

    Looking to the scenario in conventional investment I shall unable to save decent money using conventional way.
    I came to know Mutual Fund is good for long term investment and I want to invest my future monthly amount and 9 years income to Mutual fund.
    But there are lots of Mutual fund and I do not know which one to pick.

    One of my friend advise me about your blog and its very good but still I am not sure which one I need to pick.
    Kindly please advise me
    1. Mutual fund(s) for my monthly amount of 1000 t0 1500(max 2000) for 25 years
    2. Mutual fund(s) for my saved amount Rs. 1,70,266 for 25 years.
    Please note, I have PF(500+ monthly ) and did not pay Tax and I am willing take high risk and will not withdraw money before my retirement .
    Regards,
    Atanu.

    • Dear Atanu,
      1) Start with Equity Oriented Hybrid Fund (Like HDFC Hybrid Fund or Franklin Hybrid Fund).
      2) First do the asset allocation of 40:60 between debt and equity. In Debt, you can use PPF or Ultra Short Term Debt Fund. For equity, one large cap and one mid cap with 50:50 ratio.

      • Dear Mr. Tonagatti,
        Thank you for you kind response, its mean a lot.
        To be clear
        1) Start with Equity Oriented Hybrid Fund (Like HDFC Hybrid Fund or Franklin Hybrid Fund): This is for the monthly investment say 1500, right?
        2) First do the asset allocation of 40:60 between debt and equity. In Debt, you can use PPF or Ultra Short Term Debt Fund. For equity, one large cap and one mid cap with 50:50 ratio.: As advise I will invest money 70,000 in PPF account and remaining 1,00,000; 50,000 I will invest in a large cap and 50,000 in mid cap in one go. Please advise one large cap and one mid cap for the same.

        Thank you once again for your kindness.
        Regards,
        Atanu

Leave a Comment
Share
Published by
BasuNivesh
Tags: Top 10 Best SIP Mutual Funds to invest in India in 2018
9 years ago

Recent Posts

EPF Scheme 2026: EPF, EPS and EDLI Rules Explained Fully

EPF Scheme 2026 explained fully: EPF withdrawal, EPS pension, and EDLI insurance changes with examples,…

4 days ago

Financial Freedom Without Health? You’ll Regret It Later

Chasing financial freedom? Do health, time, relationships and contentment matter just as much? Sadly, we…

6 days ago

The Peltzman Effect: Why Playing It Safe Can Make You Poor

Your "safe" SIPs, SGBs, PPF, or Index Funds are secretly sabotaging your wealth. Peltzman Effect…

2 weeks ago

Your Retirement Success Depends on Luck, Not Skill

Thinking your retirement plan is foolproof? Why LUCK - not asset or fund selection or…

2 weeks ago

Never Compare Nifty 50 Index Funds Vs Active Large Cap Funds!

Nifty 50 Index Funds Vs Active Large Cap Funds — Can we really compare them…

3 weeks ago

Nifty 500 Multicap 50:25:25 vs Nifty 500: Which Is Best?

Should you pick Nifty 500 Multicap 50:25:25, Nifty 500, or Nifty LargeMidcap 250 Index Fund?…

3 weeks ago