The Sensex is just a shade away from a record high of 39,000 points. It is therefore a goood idea to place money through SIPs, which will provide a hedge against any huge downside risks to the market.
SBI Mutual Fund provides good options for investors, who are looking to invest small sums of Rs 500 to Rs 1,000 through Systematic Investment Plans or SIPs. Here are a few SIPs that could be good bets for the long to medium terms as investors continue to bet on mutual fund schemes, that could deliver superior returns than bank deposits.
SBI Blue Chip Fund
This is the biggest mutual fund scheme from SBI with assets under management of almost Rs 20,000 crores. The fund has a superb track record and has also been rated by Crisil as number one in its category.
The fund has generated a return of 7 per cent in the last one year, whereas the three year returns has been 14 per cent. The fund has some very good stocks in its portfolio including the likes of HDFC Bank, Larsen and Toubro, ITC and Mahindra and Mahindra.
Individuals can begin an SIP in the fund through small amounts of Rs 500. The initial investment of course is Rs 5,000.
This is good for those looking at good returns, though it can have a degree of risk, given that a majority of the money is deployed in equities. The current NAV under the growth scheme is Rs 39.52, while under the dividend plan it is Rs 22.48.
It is better you opt for the dividend plan, since dividends are tax free in the hands of investors.
SBI Magnum Equity
This fund like SBI Equity is a large cap fund that has assets under management of Rs 2,100 crores. We must admit that this has not been the best performing fund from the SBI stable.
The three year returns of the fund has been almost 14.35, while the 5 year returns has been even higher at 17.84 per cent.
The fund has holdings in stocks like HDFC Bank, ICICI Bank, ITC and Reliance Industries.
The fund also has several debt instruments in its holdings. Among these include some renowned government backed bonds. You can invest in the scheme with a small SIP of Rs 500 with an initial SIP of Rs 1,000.
The minimum number of cheques needed for the SIP is 12. Invest in the fund if you have a long term perspective in mind. It maybe noted that returns have always been superior where investors have held stocks for 5 years and beyond.
SBI Contra Fund
SBI Contrarian Fund follows a different investing principle, whereby it invests in stocks that have lost favor, though they are fundamentally sound.
This fund is again another good performer in the last 5 years. The fund has generated a return of almost 17.35 per cent in the last 5 years, clearly beating the performance of the benchmark indices. The fund's portfolio is very diversified.
It's top holdings are SBI, HDFC Bank, Divis Labs, Elgi Equipment, Reliance Industries and HCL Technologies.
You can start a SIP by investing a minimum of Rs 500 every month. However, the initial amount of investment that is needed is Rs 5,000. The NAV under the growth plan is Rs 113.23.
SBI Magnum Midcap Fund
Over the longer term this has been a fantastic performing SIP from SBI. The fund has generated a 5-year return of 26.82 per cent, which is excellent.
Being in the midcap space, it is best for investors who are willing to take a risk. The fund has generated a more subdued return of 10.51 per cent in the last three years. The growth scheme has an NAV of Rs 76.81, while the dividend plan of Rs 31.38.
The portfolio of the fund includes stocks like Cholamandalam, Godrej Properties, Dixon Technologies etc.
It is important to remember that midcap stocks are risky bets and hence the returns can be volatile. So, you may need to see your own requirements and needs before investing.
SBI Short Term Debt Fund
SBI Short Term Debt Fund is for those who like debt schemes. This fund, like the others mentioned above, do not invest in equity, but, only in debt.
Most of its holding is in government securities. The fund has generated a return of 7.98 in the last ten years. You can invest in the scheme with an initial investment of Rs 5,000 and Rs 1,000 thereafter through SIP.
Remember, this being a debt fund you cannot get superlative returns and most of the returns would be linked to how interest rates in the economy move. If interest rates drop you would get lower yields and when interest rates climb your yields could be higher.
A few things to remember
A few things one should remember before starting your SIPs in SBI Mutual Fund is that the markets are currently trading at very high levels. So, it is best to stay invested in SBI SIPs rather then invest lumpsum.
Systematic Investment Plans have become a flavour of the season, but, they can never provide you instant returns. Those who are investing now, are investing when the markets are very high and hence need to tone down their expectations.
Also, one should opt for the dividend plans, since dividends from equity mutual funds are tax free in the hands of the investors. However, there would be a capital gains tax on equity mutual funds, which has been introduced in the Union Budget 2018 announced by Finance Minister Arun Jaitley. Overall, it must be remembered that capital gains would now apply on mutual fund schemes as well.
Also, it is better to invest with caution, especially in equity mutual funds, given that the markets are now at a historic peak.
The article is not a solicitation to buy, sell in securities or other financial instruments. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author do not accept culpability for losses and/or damages arising based on information in this article.