Top 10 SIP mutual funds to invest in 2020

Before we get into selecting the best mutual funds for SIP and the best SIPs to invest in 2020, let us first look at why the SIPs are able to outperform lump sum-investments so consistently over a five year period.

Jan 14, 2020 10:01 IST India Infoline News Service

Systematic investment plans (SIPs) have become an important tool for Indian investors to invest in mutual funds. It is evident from the fact that close to Rs8,300cr worth of SIPs are flowing into Indian mutual funds each month; predominantly into equity funds and ELSS. Before we get into why SIPs are so attractive, let us look at the proof of the pudding. To understand the importance of SIPs, we have considered the last five year period between Jan-15 and Jan-20. During this period, the Nifty has moved up from 8,300 to 12,300, which translates into CAGR returns of 8.18%. If you had invested a lump-sum in an index fund in Jan-15, this is the kind of returns you would have earned (actually a tad lower due to costs), but let us ignore that. How would the scenario have changed had we done a SIP on an index fund / ETF instead of investing in lump-sum?
Index Fund / ETF 5-year IRR on SIP Index Returns
HDFC Index 50-ETF (Regular) 11.59% 8.18%
ICICI Pru Index Fund (Regular) 11.07% 8.18%
SBI ETF Nifty 50 (Regular) 13.05% 8.18%
Aditya Birla Index Fund (Regular) 10.71% 8.18%
Kotak Nifty ETF (Regular) 11.77% 8.18%
UTI Nifty ETF (Regular) 13.07% 8.18%
Nippon India Index Fund (Regular) 10.79% 8.18%
Data Source: Value Research and NSE


It is evident from the above table that in terms of annualized returns, even the laggards in the group of index fund above have done much better than a lump sum investment in an index fund. Why is that so?

Understanding the power of SIPs
Before we get into selecting the best mutual funds for SIP and the best SIPs to invest in 2020, let us first look at why the SIPs are able to outperform lump sum-investments so consistently over a five year period. There are 4 reasons for the same.

  • SIP does away with the need to time the market. For example, had you invested lump-sum in January 2008, you would have had to wait for 7 years to get positive returns. SIP smoothens by investing regularly.
  • SIPs make the best of volatility. This is popularly called rupee cost averaging. When the prices rise, you get more value and when prices fall you get more units.
  • SIPs compound wealth since with each contribution the principal amount and the return amount generate further returns. This is the power of compounding.
  • SIPs are powerful because they are practical. It is hard to find lump sum money to invest for everybody. SIP synchronizes inflows and outflows and creates a steady stream of wealth creation.


Let us now look at the top 10 mutual funds for SIP to invest in 2020. The only word of cautions is that these are based on past returns and hence may not be indicative.

Best SIP funds to invest in the year 2020
How is the selection of SIP different from the selection of a lump sum investment plan in a mutual fund? Conceptually, your approach to mutual funds remains the same but when it comes to SIP, consistency matters a lot. For example, if a fund has given 4%, 28% and -3% in the last 3 years, then the fund is extremely inconsistent. In such cases, the timing of entry becomes very important and defeats the purpose of a SIP. Here are some SIPs investors can look at for year 2020.

Fund Name Net Assets 1-Year SIP (%) 3-Year SIP (%) 5-Year SIP (%)
Mirae Emerging Bluechip Rs9,229cr 16.90% 16.90% 15.90%
ICICI Pru Blue-chip Equity Rs394cr 30.60% 16.70% 14.00%
Birla Banking Fund Rs1,973cr 15.60% 16.90% 13.60%
SBI Small Cap Fund Rs3,035cr 9.30% 14.40% 13.60%
Axis Focus 25 Fund Rs8,891cr 19.00% 18.60% 13.00%
Birla Gen Next Fund Rs1345cr 15.30% 15.60% 12.70%
Mirae Great Consumer Rs952cr 9.90% 18.00% 12.00%

Data Source: AMFI

The 1 year returns and 3 year returns are not really meaningful as they are too short term. Ideally returns over 5 to 10 years give a better picture. The idea here is to look at consistency. For example, the top ranked Mirae Emerging Blue Chip is consistent across time frames but an ICICI Pru Blue-chip Equity shows huge return divergence. Also, you must set a basic threshold of Rs2000cr AUM for returns to be really measurable. You are set to go!

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