Which mutual fund is best for SIP for long term financial goals? #Finance

hey everyone today the Indian mutual fund Market is flooded with hundreds of options across various categories making it very challenging to pick the right mutual fund so one question I frequently get asked is Sy which is the best mutual fund for sip in India that would take care of all

long-term financial goals now I have personally asked many people what parameter do you look at while shortlisting a mutual fund for long-term Financial goal the most common answer is returns naturally everyone wants to maximize their investment return majority of retail investors start sip based

on past performance often short listing funds that have generated highest return over the past 1 to three year but there have been many cases where after 2 three years they’ve realized that their mutual funds are not doing well and they get confused whether to sell hold or continue the Sip

this is the core challenge with active mutual funds while some active mutual funds will outperform there’s no guarantee that the ones you invest in will continue to outperform in fact a report from spiva India for 2023 three showed that 73% of active midcap and small cap funds and 52% of

large cap funds failed to beat their Benchmark in 20123 even in a bullish Market another issue with active fund is their cyclical nature during bull rally small and midare fund shows significantly High return as compared to large cap funds obviously that attracts retail investors towards mid and

small cap and that’s what is happening now today everyone wants to do sip in mid and small cap funds however it’s crucial to balance risk with returns mid and small cap funds certainly generate High returns during bull market but in bare Market Corrections they tend to drop sharply I

clearly remember during 2018 to 20 the entire mid and small cap index was down 40 to 50% now I’m not saying mid and small caps are bad but a balance Portfolio across large mid and small cap is very important so there are two important takeaways first is a lot of active mutual

funds fail to beat The Benchmark and there’s no guarantee that the mutual fund you start sip would continue to outperform in the future and second while mid and small cap May outperform large cap in bull market they can also potentially fall sharply during bare Market that’s where your

index fund comes into picture please note that I’m not completely against active funds but for long-term goals I recommend that the core Portfolio should include Index Fund you can still allocate a portion of your Portfolio in active funds but a good portion

of your investment should be in Index Fund in fact now that more and more people are realizing the importance of index fund they are already gaining popularity big time in India as per recent data of August 24 passive mutual funds have crossed an AUM of 10 lakh CR rupees although it is still much

lower than the active mutual fund a which is around 50 lakh CR but if you look at the growth rate 5 years ago passive mutual funds had an AUM of just 1.77 lakh CR So within 5 years this AUM has grown almost six times in passive fund and going forward passive mutual fund am is expected to touch

levels of 25 to 30 lakh CR by 203 30 that would be 25 to 30% of total mutual fund a now the question is how do you select the best Index Fund for long-term goals let’s have a look so first of all if you look at the advantages of index fund the biggest Advantage is the low cost Index Fund

usually have a low expense ratio in the range of 0.1 to 0.2% compared to active funds with 0.5 to 1.5% range of expense ratio now this might look like a small difference but in the long run it makes a significant impact on return Then second benefit of index fund is Market link performance the

index funds are actually dynamic in nature as they linked to the market if a company underperform it is replaced by an outperformer keeping the index fund aligned with Market Trend so if you’re optimistic about India’s growth index funds offers a great representation of that growth now

there are various index funds category like nifty50 Nifty next50 Nifty 100 Nifty 500 and so on so nifty50 invest in top 50 companies of India Nifty next50 invest in companies ranking from 51 to 100 likewise Nifty 500 invest in top 500 companies of India here please note that the investment would be

done based on the weightage of the company in the index as per the free float market cap for instance if Reliance has 8% weightage so out of 100 rupee 8 rupe would be invested in Reliance for most people a simple nifty50 or Nifty 100 fund is sufficient just keep in mind that Index Fund don’t

perfectly replicate the index due to tracking error primarily from expense r itio and cash H for Redemption considering all these factors nifty50 is generally one of the best choice for long-term investment now let us quickly look at some of the index fund in nifty50 category so this is the list of

top nifty50 Index Fund you can see the scheme name here nav AUM rating onee return threee fiveyear return and expense ratio you have names like bnda nifty50 you can see the a one year return is 22% so generally if you look at it all of them are showing similar 22% kind of return threee return is

around 10% but 5e return is around 15% which is a great return for long term and you can see the expens ratio 0.1 0.17 you’ve got a lot of names like IC sdfc UTI nifty50 Tata nepon Franklin adilla then mtila oswal kotak then exus nifty50 and so on now let’s quickly look at one index

fund and try to understand the constituent within that so let’s click on EXs nifty50 Index Fund and uh look at the performance so if you look at one year return ISU 22% and current n is 14 and uh you can see this uh NV movement as well across time frame of one year 1 month five year likewise

uh if you want to understand more about this Index Fund uh you can see the fund performance as well and the constituent here you can see sdfc bank has got a vage of 11.3% then Reliance has 8.6% vage so out of 100 RUP 11.3 would be invested in sdfc 8.6 would be invested in Reliance IC 7.7 rupee

likewise based on the weightage and then you can see all the top names uh that include your infosis ITC bhel TCS L&T EXs Bank SBI Mahindra and Mahindra and so on then you can also see the sectoral breakup so Financial Services has got 32.8% weightage uh technology has got 12.7% weightage energy

has got 11.8% weightage consumer cyclical has got 10.8% % weightage likewise you have consumer defensive basic material Industries and so on apart from this you can also see the uh details

for that particular Index Fund fundance here you can see the AUM is uh 547 CR uh cash position likewise uh uh you can see uh your various uh important parameters like expense ratio of excess nifty50 is quite low at just 0.12% and uh you can also look at the fund manager detail Risco meter and more

detail about the fund house and and so on so in this CashNews.co we discussed why index funds are getting more popular in India and then we looked at nifty50 Index Fund which is one of the best choice for long-term investment this wraps up the CashNews.co now tell me in the comment do you have

exposure in Index Fund or not and if you find this CashNews.co informative please share it with your friends and family to help spread awareness about the benefit of index fund for long-term Portfolio I’ll see you next CashNews.co till then take care