“I want to make SIP investments for the next 5 years in order to accumulate retirement savings. What are the best Mutual Funds for this purpose?” – Chavi Dubey.
SIP or Systematic Investment Plan is a great way to save for long-term goals like retirement as you can invest small amounts of money over a period of time and build a corpus. A monthly SIP of just Rs. 10,000 in an equity fund earning 12% can accumulate approximately Rs. 1 Crore in a 20 years time span. Similarly, you can use SIP Calculator to find out the amount of SIP you need to do to accumulate your desired corpus.
Now, since you are looking to do a SIP for 5 years, you should be investing in Equity Mutual Funds. That’s because this time duration is fairly long-term and equities are your best bet for wealth creation over the long term.
Also, if you are not retiring at the end of these 5 years, even if you do stop the SIP, it would be a good idea to stay invested till your retirement. This staying invested will ensure that your money continues to grow.
Equity Linked Savings Schemes (ELSS)
If you have not already exhausted your annual Section 80C limit of Rs. 1.5 lakh, you should go for Equity Linked Savings Schemes (ELSS) Mutual Funds. Investments in these funds are eligible for tax deduction under Section 80C, so you can save up to 46,800 annually in taxes.
ELSS Funds invest in companies of different market capitalizations and across all sectors. So you get a portfolio that is diversified.
However, these benefits of ELSS Funds come at the cost of redemption flexibility. You are mandatorily required to stay invested in these schemes for at least the 3-year lock-in prior to redeeming your investment.
Best ELSS Funds | ||
| Fund Name | ETMONEY Rank | 5 Year Returns |
| Quant Tax Plan | 1 | 23.7% |
| Mirae Asset Tax Saver | 2 | 22.32% |
| DSP Tax Saver | 3 | 17.08% |
| Canara Robeco Equity Tax Saver | 4 | 19.49% |
| Kotak Tax Saver | 5 | 16.47% |
*5 year returns as of 6th September 2021
ETMONEY rankings are dynamic and subject to change.Click here for current list of Top ELSS Funds
Flexi Cap Equity Funds
You can also consider using a 5-year SIP to save for your retirement by investing in a Flexi-Cap Mutual Fund.
These Equity Mutual Funds can invest in stocks irrespective of their market capitalization and sector. So, you get a diversified portfolio and that reduces risk. While there is no lock-in period for Flexi Cap Fund investments, to maximize your potential returns, it is recommended that you stay invested in these schemes for periods exceeding 5 years.
Best Flexi Cap Funds | ||
| Fund Name | ETMONEY Rank | 5 Year Returns |
| PGIM India Flexi Cap Fund | 1 | 20.60% |
| Quant Active Fund | 2 | 23.67% |
| Parag Parikh Flexi Cap Fund | 3 | 21.88% |
| UTI Flexi Cap Fund | 4 | 18.58% |
| Canara Robeco Flexi Cap Fund | 5 | 18.55% |
*5 year returns as of 6th September 2021
ETMONEY rankings are dynamic and subject to change.Click here for the current list of Top Flexicap Funds
Large and Mid Cap Equity Funds
Large and Mid Cap Equity Funds invest at least 35% of their assets in Large Cap Equities and an additional 35% of assets in Mid-Cap Equities. This allows you to invest in both current and potential market leaders across various sectors.
Investing in Large and Mid Cap Funds gives you exposure to fast-growing mid-sized companies with relatively lower risk as compared to pure mid-cap funds.
Best Large and Mid-Cap Funds | ||
| Fund Name | ETMONEY Rank | 5 Year Returns |
| Mirae Asset Emerging Bluechip Fund | 1 | 21.84% |
| Edelweiss Large and Mid Cap Fund | 2 | 16.74% |
| Kotak Equity Opportunities Fund | 3 | 16.81% |
| Tata Large and Mid Cap Fund | 4 | 15.22% |
| Quant Large and Mid Cap Fund | 5 | 15.88% |
*5 year returns as of 6th September 2021
ETMONEY rankings are dynamic and subject to change.Click here for the current list of Top Large and Midcap Funds
Mid Cap Equity Funds
If you are willing to take some more risk for the chance to earn higher returns, you can consider Mid-Cap Funds.
These funds primarily invest in companies that have the potential to emerge as future market leaders. However, the smaller size of mid-cap companies also means that unlike large-cap companies they can face massive challenges in tough economic conditions. This can result in higher volatility in performance and hence higher risk when investing in Mid-Cap Funds.
Best Mid Cap Funds | ||
| Fund Name | ETMONEY Rank | 5 Year Returns |
| PGIM India Midcap Opportunities Fund | 1 | 21.49% |
| Axis Midcap Fund | 2 | 21.87% |
| Kotak Emerging Equity Fund | 3 | 18.89% |
| BNP Paribas Midcap Fund | 4 | 16.75% |
| Quant Midcap Fund | 5 | 20.37% |
*5 year returns as of 6th September 2021
ETMONEY rankings are dynamic and subject to change.Click here for the current list of Top Midcap Funds
Conclusion:
In conclusion, SIPs are an excellent way to accumulate retirement savings over a 5-year period. When selecting the best Mutual Funds for a 5-year SIP, it is recommended to focus on Equity Mutual Funds due to their long-term wealth creation potential. The SIP Calculator App can be a valuable tool in estimating the potential growth of your investment. Based on your risk appetite, you can consider options like ELSS Funds, Flexi Cap Equity Funds, Large and Mid Cap Equity Funds, or Mid Cap Equity Funds. It’s important to review the performance of the funds, considering factors such as returns, fund rankings, and consistency. By making informed decisions and staying invested, you can work towards achieving your retirement goals.
As a financial expert with a demonstrated understanding of investment strategies and mutual funds, I'd like to delve into the concepts covered in the article about making SIP investments for retirement savings over the next 5 years.
SIP (Systematic Investment Plan): SIP is a disciplined and systematic way of investing in mutual funds. It allows individuals to invest small amounts regularly over time, providing the benefit of rupee cost averaging. The article rightly emphasizes its suitability for long-term goals like retirement.
Equity Funds for 5-Year SIP: Given the 5-year investment horizon, the recommendation to focus on Equity Mutual Funds is sound. Equities historically offer the best returns over the long term. The article correctly advises staying invested even if the SIP is stopped, ensuring continued growth until retirement.
ELSS (Equity Linked Savings Schemes): ELSS funds, mentioned in the article, are a tax-saving variant of equity mutual funds. They come with a lock-in period of 3 years, providing tax benefits under Section 80C. The article provides a list of best-performing ELSS funds, including their ETMONEY ranks and 5-year returns.
Flexi Cap Equity Funds: Flexi Cap funds offer flexibility in investing across market caps and sectors, reducing risk through diversification. The article recommends considering them for a 5-year SIP, highlighting the absence of a lock-in period. It also provides a list of top-performing Flexi Cap funds with ETMONEY ranks and 5-year returns.
Large and Mid Cap Equity Funds: These funds invest in both large and mid-cap equities, offering exposure to established and growing companies. The article lists the best-performing Large and Mid-Cap funds, including their ETMONEY ranks and 5-year returns.
Mid Cap Equity Funds: Mid-Cap funds, mentioned as higher-risk options, invest in smaller companies with growth potential. The article outlines the risk and return dynamics of Mid-Cap funds and provides a list of top performers with ETMONEY ranks and 5-year returns.
Conclusion: In conclusion, the article advocates SIPs as an excellent strategy for accumulating retirement savings over a 5-year period. It emphasizes the importance of focusing on Equity Mutual Funds and provides options based on risk appetite, including ELSS Funds, Flexi Cap Equity Funds, Large and Mid Cap Equity Funds, or Mid Cap Equity Funds. The use of tools like the SIP Calculator App is recommended for informed decision-making, considering factors such as returns, fund rankings, and consistency. Staying invested and making informed choices are highlighted as key to achieving retirement goals.
If you have any specific questions or need further clarification on these concepts, feel free to ask.
