If you ask ten people about the best mutual funds for SIP, there are good chances that you will receive ten different answers, all of which are going to be based on the mutual funds that did well in the previous year. It couldn’t have been a worse way of deciding on a SIP fund for your 10 or 15-year SIP goal.
If you want to know about the best SIP plan for 10 years or the best SIP plan for 15 years, then the best answer that you would receive is not a SIP fund name. What you require is a set of principles for SIP, something that would help you design a perfect SIP portfolio.
Why Time Horizon Changes Everything
Before choosing any fund, one must be clear about their time horizon, as it determines the risk appetite of the investor.
A 10-year SIP has enough time to average out the ups and downs but not an infinite amount of time – markets can collapse in year nine and not give enough time to recover before the fund becomes due. On the other hand, a 15-year SIP has enough time to withstand not only one but two or three cycles of the stock market and hence can have more exposure towards equities.
This is the most common mistake that investors commit – they invest in the same type of funds irrespective of whether it is a 10-year or a 15-year SIP.
What Actually Makes a SIP “the Best” One
Before we discuss the fund categories, it would be useful to define what “best” implies in the case of an SIP over a longer period of time. It’s not usually about getting the best one-year and three-year returns. Here are the criteria that should matter:
- Consistency of performance irrespective of the market cycle – has the fund done okay not just during rallies but also during bear markets?
- Stability of fund manager and management process – constant changes in the manager or management process should be a red flag for the long term.
- Expense Ratio – over a span of 10-15 years, even 0.5% can make all the difference to your corpus size.
- Quality of stocks in the portfolio – is the fund holding fundamentally strong companies, or is it holding momentum stocks?
Here are the filters that you need to keep in mind as we discuss the fund categories below.
Best SIP Plan for 10 Years: What to Look For
The time frame of 10 years is sufficient for equity to be the dominant asset class for investment, but even then it is relatively short, which makes the investor adopt a slightly more diversified strategy compared to someone who invests for 20 years or more.
Flexible cap and multiple cap schemes can be considered a good choice for a 10-year SIP. The reason being, these are not limited to investing in large caps, mid caps, or small caps; rather, the manager can choose stocks from any market capitalization as per his/her preference.
Larger cap funds have their place, too, particularly if capital protection is important to you. Large-cap stocks tend to be more stable during downturns, thus reducing the chances of a badly timed market crash affecting your corpus just before the culmination of your 10-year plan.
If you are not interested in too much growth and are looking for somewhat lower volatility, aggressive hybrid mutual funds (a combination of equities and debt, typically between 65-80% equities) should be considered. This type of fund may be appropriate if your 10-year SIP is linked with any particular goal for which you cannot afford any shortfall — for example, higher education of your child.
An ideal asset allocation in your 10-year SIP portfolio can be 40% flexi cap, 30% large cap, 20% aggressive hybrid and 10% mid cap (for some growth upside). You can make changes depending on your risk tolerance, but it would not be advisable to put everything in small-cap and sectoral funds for a 10-year SIP portfolio.
Best SIP Plan for 15 Years: What to Look For
A 15-year investment horizon is one where time works greatly in your favor, making a huge difference to the whole game plan. Since there are more years to recover, one has the freedom to take some volatility.
Mid-cap and small-cap funds now become feasible SIP options for 15 years, which they were not for 10 years. While they tend to be volatile in the short term, in the long run, they offer better growth potential, as the smaller firms grow into bigger ones. This kind of growth potential has to be seen through over a period of 15 years.
In addition, Flexi-cap funds continue to provide a great core investment. The flexibility associated with it has its value irrespective of the investment horizon, and in 15 years, when different sectors come to the fore, this flexibility comes in handy.
However, there is no doubt that an index fund is definitely worthy of consideration for 15-year SIPs. Over extremely long horizons, most actively managed schemes find it difficult to beat their benchmarks consistently even after adjusting for costs; therefore, a cost-effective index fund which tracks the Nifty 50/Nifty 500 index becomes a viable proposition.
Sectoral or thematic funds can make some satellite investments in a 15-year horizon portfolio (about 5-10%), as you have the luxury of time to ride out any dips in the particular sectors. However, sectoral or thematic funds should never become the core holding – they are just too concentrated to be considered for a core objective.
Here is a tentative sample asset allocation for 15-year SIPs: Flexi-cap 30%, index fund 25%, mid-cap 20%, large-cap 15% and small-cap or thematic cap 10%. Please note this is only a tentative framework and may require adjustments based on your risk appetite.
Step-Up SIPs: The Underrated Strategy for Long-Term Goals
A mistake that most beginners make: you don’t have to keep your SIP constant for 10 or 15 years. A Step-Up SIP (or Top-Up SIP), as the name suggests, increases your monthly SIP by a fixed percent or amount every year, following your growing income levels.
And this is very significant in long-term wealth creation. A person starting with an investment of ₹10,000 per month and increasing it by 10% each year will end up building a much larger corpus after 15 years than a person who sticks to an investment of ₹10,000 each month – without the additional investment putting any burden on his budgeting, as it follows his growing income levels.
How to Actually Evaluate a Fund Before Investing
Now that you’ve made up your mind about the categories and allocation, let’s go through a quick checklist before finalizing any particular fund:
- Performance: check the performance of the fund in at least two market cycles (the more history – 10+ years – the better).
- The cost or expense ratio: check whether the ratio is reasonable compared to other funds in the same category – not necessarily low, just reasonable.
- Turnover: see how much turnover there is. High turnover indicates a tactical investment approach.
- Fund manager tenure and investment philosophy consistency are more important than outperformance.
- Risk-o-meter: check that the rating matches your own risk tolerance.
Common Mistakes to Avoid
Trying to follow last year’s best-performing fund. Ratings tend to change annually; an SIP lasting 10 or 15 years requires a fund that does not just perform well in one year but is capable of doing reasonably well over several cycles.
Over-diversification among too many funds. Maintaining eight to ten SIPs among similar categories of funds will neither diversify risks nor simplify your portfolio, since four or six SIPs would be sufficient.
Suspension of SIPs in bear markets. This will render rupee cost averaging useless. A SIP purchases more units during a correction in the market, so suspending SIP during the downturn will only lead to the worst outcome.
Neglecting goal-based tagging of SIP. A SIP for retirement after 15 years and another for buying your dream house after 10 years should be kept in different portfolios.
Final Thoughts
There is not going to be an ‘ideal’ fund suited to everyone who has a 10 or 15-year perspective, as it will depend on your risk profile, portfolio mix, and eventual purpose for the funds. More important than finding the ‘ideal’ fund is putting in place a sound framework, where you allocate your assets to equities based on your horizon, diversify properly by market cap, maintain low costs, and stay invested regardless of market cycles.
If you wish to find out the best SIP plan for 10 years or the best SIP plan for 15 years that will suit you personally, it might pay to invest your time in speaking to a SEBI-approved investment advisor or a sophisticated fund comparison engine rather than a top-10 funds list, which will become outdated very quickly.
Frequently Asked Questions (FAQs)
Which mutual fund is best for SIP for 15 years?
Flexi-cap and large-and-mid-cap equity mutual funds provide the best combination of consistent compounding and inflation-beating returns for a 15-year Systematic Investment Plan (SIP).
Which SIP is best for 10 years for the long term?
Diversified equity categories such as Flexi Cap Funds and Large & Mid Cap Funds provide the ideal combination of steady growth and strong compounding potential for a 10-year long-term Systematic Investment Plan (SIP).
What is the 7 5 3 1 rule in SIP?
A behavioral and strategic guideline for investing in mutual funds through a Systematic Investment Plan (SIP) is the 7-5-3-1 rule. It supports investors in developing long-term wealth, managing risk, and upholding discipline.
How to make 1 cr in 15 years with SIP?
With a Systematic Investment Plan (SIP), you would need to invest about ₹20,000 a month to earn ₹1 crore in 15 years, assuming a reasonable annual return of 12%.
Is SIP 100% safe in India?
Because a Systematic Investment Plan (SIP) is dependent on market performance and does not ensure returns, it is not entirely safe.
Is SIP better than FD?
The SIP works best for increasing one’s wealth in the long run, whereas FDs are better suited for short-term savings where security and guaranteed returns are desired. There is no “better” or “best” option here; everything depends on what one’s financial priorities are.
How much is a 10,000 monthly SIP for 10 years?
Your total investment will be ₹12,00,000 (₹12 lakhs) if you put ₹10,000 a month into a Systematic Investment Plan (SIP) for ten years.
What is the right time to stop SIP?
Only when you reach your financial objective, encounter a serious financial emergency, or the mutual fund exhibits persistently subpar performance over an extended period of time can you terminate a Systematic Investment Plan (SIP).