In this article, I will share my Top 10 Best SIP Mutual Funds to invest in India in 2019. Yearly I will publish my Top 10 Best SIP Mutual Funds to invest in India. Continuing that trend, I will publish the list for 2019.

Two major things happened to the Mutual Fund industry during the 2018 years.

# SEBI Recategorization-SEBI came up with new set of categorization. This was a huge shock to the Mutual Fund Industry. Because many funds are forced to merge with similar funds offered in the AMC. Also, this gave the investors about the clarity on the fund types. (Refer my post “SEBI Mutual Fund Categorization and Rationalization – How it helps investors? “). However, due to this big change, Large Cap may suffer to beat the index.

# TRI (Total Return Index)- When you invest in stocks, there are two types of benefits. One is price appreciation in the stock and another is dividend income. Earlier the mutual fund companies use to benchmark the indexes which are not inclusive of dividend income. With new SEBI ruling now all mutual fund companies are forced to benchmark the respective TRI Index for their funds.

These two big moves made me also to wait for few more months. Earlier I used to publish my Top 10 funds list in the month of November or December.

Now let us move on and try to find the basics of investing. Request you all readers to read this at first and then jump into the fund selection process.

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 2019-20

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.

Mutual Fund Taxation FY 2019-20 -Based on holding period

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

Mutual Fund Taxation FY 2019-20 -Capital Gain Tax Rates

Below is the DDT Rates applicable to Mutual Funds after the Budget 2019.

Mutual Fund Taxation FY 2019-20 - DDT Rates

Hope taxation part is clear to all of you. If you still have doubt, then refer my latest post “Mutual Fund Taxation FY 2019-20“.

How I selected Top 10 Best SIP Mutual Funds to invest in India in 2019?

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 10 funds alone be considered as “Top 10 Best SIP Mutual Funds to invest in India in 2019”. 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 2019 -Large Cap

The biggest change in this category is that due to recent SEBI Recategorization and after referring to the various studies (One done my Mr.Pattu “Only Five Large Cap funds have comfortably beat Nifty 100 “), I am not selecting any active Large Cap Funds. I am sticking to Index Fund.

The advantage is that you no need to chase the BEST Fund Manager or Best Fund also. Because for such funds they replicate the Index. Also, the expense ratio is low compared to active funds.

The only disadvantage (few may point out) is that no downside protection. However, with proper asset allocation and including the hyrbid funds we can easily negate this.

Hence, in Large Cap space , I am recommending two Index Funds.

Best SIP Mutual Funds to invest in India in 2019 -Large Cap

Here, you noticed that I have included on Nifty and another Sensex Fund. Keep one thing in mind that, there is no such huge difference when it comes to Nifty or Sensex Returns. Hence, you can choose anyone from the above. said funds.

What the existing investors must do with their active large cap funds? The answer is please continue for time being. But keep an eye on their respective funds with the benchmark. Slowly move to Index Funds in Large Cap Category.

Best SIP Mutual Funds to invest in India in 2019 -Multi-Cap

Here also, due to the SEBI Recategorization, I am changing my stance and completely moving to new funds rather than retaining my old funds. However, those who invested in my earlier recommended funds may continue as usual (but by keeping an eye).

The below funds may not be STAR rated funds. However, they are the consistent performers.

Best SIP Mutual Funds to invest in India in 2019 -Multi Cap

Best SIP Mutual Funds to invest in India in 2019 -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.

Best SIP Mutual Funds to invest in India in 2019 -Mid Cap

Best SIP Mutual Funds to invest in India in 2019 -Small Cap

In this category also, earlier I have recommended DSPBR Small Cap Fund and also Franklin India Smaller Companies Fund. I am retaining the same funds for this year too.

Best SIP Mutual Funds to invest in India in 2019 -Small Cap

Best SIP Mutual Funds to invest in India in 2019 -Equity Oriented Balanced Funds or Agressive Hybrid Fund

Here, I am retaining earlier fund of HDFC (HDFC Hybrid Equity Oriented Fund) and recommending the new fund rather than the earlier ICICI Balanced Fund to Franklin India Equity Hybrid Fund.

Best SIP Mutual Funds to invest in India in 2019 -Hybrid Aggressive Fund or Balanced Fund

The final list of Top 10 Best SIP Mutual Funds to invest in India in 2019 is as below.

Top 10 Best SIP Mutual Funds to invest in India in 2019

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 my latest posts related to Mutual Funds:-

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