How to select a good mutual fund to invest in with SIP?

Thinking about starting your investments in Mutual funds? No doubt that this is one of the best steps you are going to take towards wealth creation but like many other industries, Mutual Funds require some learning to do the right sort of investment according to your goals. Read our article to know which Mutual fund to select to start your SIP in.

Wealth creation is not an easy task. But taking the right steps towards this direction- no matter how small they are- can make it easy to bridge the gap. Systematic Investment Plan is one such way to make your dream come true. Here, we offer you some tips on how to select a good mutual fund.

Know about the different mutual funds

Recently, SBI categorized debt mutual fund schemes into 16 more categories like:

Overnight mutual funds- These are open-ended mutual funds that invest money in the overnight securities with a maturity of one day. This kind of investment is not preferred by the conservative investors.

Liquid funds- These funds invest money in debt and money market securities with a maturity of 91 days. These funds are meant for the investors who don't believe in taking the risk.

Ultrashort duration funds- These funds will invest money in debt and money market instruments with duration of three to six months. Low duration mutual funds- in this the investor need to invest an amount in debt and money market mutual funds with duration of six to 12 months. Then there is money market mutual funds, short duration mutual funds (duration of one to three years), medium duration funds (three to four years), medium to long-term mutual funds (duration of four to 7 years), Gilt funds, floater funds etc.

Hybrid mutual funds- These schemes invest approximately 75 to 90% of total assets in the debt instruments and the remaining in equity related schemes. These schemes are applicable for the conservative investors.

Equity Mutual Funds- These funds are meant for the investors who want to earn the high return in the volatile share market. The schemes are categorized as multi-cap funds (scheme that help the investor to invest the amount in large cap, mid cap or small cap stocks), large-cap funds (it allows the investor to invest 80% of the amount in the large-sized companies), Large cap and mid-cap schemes- these schemes help the investor to invest 35% of the amount in the large-cap and 35% in the mid-cap stocks. These stocks are bit risky than large-cap schemes.

Select right mutual fund distributor

If you are new to the world on Mutual Funds, get started by taking the assistance of a Mutual Fund distributor who will guide to select the right fund. Hire the distributor which is well-qualified to understand different asset classes, the advisor should be able to understand the psychology of the investor and identify the products for them accordingly. Also, the advisor should be accessible when you need it. After a few years once you are confident of identifying the right mutual fund you can make the shift to direct Mutual Funds.

Know the nuts and bolts of the mutual fund industry

Not only schemes and duration, the investor should understand how the funds are taxed too. For example, if you have debt mutual funds into your portfolio for duration less than 3 years, the returns will be treated under the head short term capital gains, if you have hold debt instrument for more than 3 years, the returns will be taxed under the head long term capital gains tax, for equity schemes if you sell it before one year it would be treated as short term capital gain tax, if you sell the equity investment after one year, the returns would be treated as long term capital gains tax.


Before selecting the right mutual fund for SIP, it is pertinent to introspect yourself. Ask these questions.
How much investments are required for a goal?
What are your personal finance goals?
How much to invest in a particular asset class?
What kind of returns do you expect from an investment?
If you are yet to make a detailed plan, worry not; hire an advisor or an expert.

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