Best SIP To Invest For 1 Year

Investing your hard-earned money wisely is crucial for achieving your financial goals. If you're looking for a short-term investment option that offers potential growth and flexibility, a Systematic Investment Plan (SIP) for one year might be just what you need. Let's explore the world of 1-year SIPs and discover the best options available in 2024.

What Is A Systematic Investment Plan (SIP)?

A Systematic Investment Plan, commonly known as SIP, is a popular investment strategy that allows you to invest a fixed amount regularly in mutual funds. Instead of investing a large sum at once, you can spread your investment over time, typically every month. This approach offers several benefits:

1. Disciplined investing: SIPs encourage consistent savings habits by automating regular investments.

2. Rupee cost averaging: By investing a fixed amount periodically, you buy more units when prices are low and fewer when prices are high, potentially lowering your average cost per unit over time.

3. Flexibility: You can start with small amounts and increase or decrease your investment per your financial situation.

4. Power of compounding: Regular investments can benefit from compounding returns, potentially enhancing your wealth in the long run.

For example, if you invest ₹5,000 per month in a SIP for one year, you'll invest a total of ₹60,000. Depending on the fund's performance, this amount could grow to a larger sum by the end of the year.

5 Best SIP Plans For 1 Year In India To Invest In 2024

Choosing the right SIP plan for a one-year investment horizon requires careful consideration. Here are five top-performing SIP plans that offer a balance of stability and potential returns for short-term investors:

Note: Data and NAV as of June 30, 2024

These funds have been selected based on their consistent performance, low-risk profile, and suitability for short-term investments. 

An Overview Of The Top SIP Plans Investment For 1 Year In India

● ICICI Prudential Liquid Fund aims to provide steady returns while maintaining high liquidity. It invests in a mix of short-term debt and money market instruments with a maturity of up to 91 days. With a low expense ratio of 0.01% and a 1-year return of around 7.37%, it's an attractive option for conservative investors looking for stable returns.

● Aditya Birla Sun Life Savings Fund: This ultra-short-duration fund focuses on generating steady income through investments in a debt and money market instruments portfolio. With a 1-year return of 7.63% and an expense ratio of 0.34%, it offers a good balance of returns and risk for short-term investors.

● HDFC Overnight Fund: This fund invests in overnight securities for extremely risk-averse investors, ensuring high liquidity and capital preservation. While the returns are modest (6.77% for 1 year), it offers one of the safest investment options with an expense ratio of just 0.1%.

● Axis Liquid Fund: This fund invests in a diversified portfolio of high-quality, short-term debt and money market instruments. With a 1-year return of about 7.39%) and an expense ratio of 0.01%, it provides a good mix of safety and returns for short-term investors.

● Kotak Savings Fund: This low-duration fund aims to generate income through investments in debt and money market instruments. With a 1-year return of approximately 7.41% and an expense ratio of 0.36%, it offers slightly higher returns than pure liquid funds, making it suitable for investors with a slightly higher risk appetite.

Advantages Of Investing In SIPs For 1 Year

Investing in SIPs for a one-year duration offers several benefits:

● Low risk: Short-term debt funds typically invest in high-quality, low-risk instruments, making them suitable for conservative investors.
● High liquidity: Most funds allow easy redemption, providing quick access to your money when needed.
● Better returns than savings accounts: While returns may vary, these funds generally offer higher returns than traditional ones.
● Flexibility: You can start with small amounts and increase your investment as your financial situation improves.
● Tax efficiency: Short-term capital gains from debt funds are taxed at your income tax slab rate, which can be more favourable compared to interest income from fixed deposits for some investors.

For instance, if you invest ₹10,000 per month in an SIP that generates a 7% annual return, you could earn around ₹4,500 in returns over a year, significantly higher than a typical savings account would offer.

Why Choose A 1-Year SIP Plan?

Opting for a 1-year SIP plan can be beneficial for several reasons:

● Short-term goals: If you have financial objectives within a year, such as saving for a vacation or a down payment, a 1-year SIP can help you achieve them systematically.
● Learning experience: A one-year SIP provides a good introduction to mutual fund investing without a long-term commitment for new investors.
● Emergency fund building: You can use a 1-year SIP to build or boost your emergency fund, ensuring you have liquid assets when needed.
● Market volatility management: Spreading your investment over a year can potentially reduce the impact of short-term market fluctuations.
● Flexibility: If your financial situation changes, you can reassess and adjust your investment strategy after a year.

For example, if you plan to buy a new smartphone worth ₹30,000 next year, you could start a SIP of ₹2,500 per month in a liquid fund. This systematic approach can help you accumulate the required amount while earning some returns on your savings.

Factors To Consider While Choosing SIP Plans For 1 Year

When selecting a SIP plan for a one-year investment horizon, keep these factors in mind:

● Fund objective: Ensure the fund's investment objective aligns with your short-term goals. Look for funds that prioritize capital preservation and liquidity.
● Risk profile: Choose funds with a low to moderate risk profile to minimize potential losses over the short term.
● Past performance: While past performance doesn't guarantee future results, it can provide insights into the fund's consistency and risk management.
● Expense ratio: Lower expense ratios can help maximize your returns, especially for short-term investments.
● Exit load: Check for any exit loads for early redemption, as this can impact your returns if you withdraw before the year ends.
● Fund size: Larger funds may offer better stability and liquidity, which can be crucial for short-term investments.
● Fund manager's track record: Consider the manager's experience and performance history in handling short-term debt funds.

For instance, if you're comparing two liquid funds with similar returns, but one has an expense ratio of 0.20% while the other charges 0.40%, the fund with the lower expense ratio would be more favourable for a 1-year investment, potentially saving you around ₹200 per ₹1,00,000 invested over the year.

Conclusion

Investing in SIPs for one year can be an excellent strategy for achieving short-term financial goals while maintaining flexibility and liquidity. By choosing the right fund that aligns with your risk profile and investment objectives, you can earn better returns than traditional savings options. Remember to review your investment regularly and consult with a financial advisor if needed to ensure your SIP strategy continues to serve your financial needs effectively.