India seems to have more and more mutual funds emerging every second day. But there are stalwarts in the industry that have proven their worth time and time again. One of these is the Aditya Birla Sun Life AMC started in 1994. This fund house has delivered significant returns for its investors since its inception. Today, it is one of the biggest mutual fund management companies in India. So, how do you choose the best Aditya Birla mutual fund scheme for a systematic investment plan (SIP)? Here is everything you need to know.
About Aditya Birla Sun Life AMC
This AMC is a joint venture between Aditya Birla Capital and Sun Life AMC Investments Inc. It offers a staggering 185 mutual fund schemes. This number includes 36 equity fund schemes, 126 debt fund schemes, 5 hybrid fund schemes, and 18 other scheme types. So, investors get a wide range of choices when opting for mutual fund schemes all from a single mutual fund house.
Choosing the best Aditya Birla mutual fund scheme for SIP
- Investment objective
This is the number one principle that should guide the investor. It refers to the investor’s financial goal and what they wish to accomplish with their investment. For example, if their objective is to generate a large wealth corpus then equity funds are their best bet. It can range from tax-saving to financing a car or property, funding a child’s education, and more.
- Investment horizon
The investment objective could be either a long-term or a short-term financial goal. Here investment horizon refers to the time for which the investor wishes to keep their money invested in a scheme. Different types of mutual fund schemes are suitable for different investment horizons. Shorter fund horizons of three years or less should entail investment in debt funds. To get the most out of wealth-generating equity funds, it is necessary to remain invested for 5 years or more. While a horizon of three to five years may be suitable for hybrid funds.
- Risk appetite
The investor’s risk appetite or risk tolerance should also be a crucial guiding factor for their SIP investment. So, a person with a large risk appetite may be able to invest in equity schemes that invest in small or mid-cap companies. Investors with lower risk appetites may choose pure large-cap funds, while investors with middling risk appetites can choose a fund that has a mix of market caps or multi-cap funds. Investors with moderate risk appetite may invest in hybrid funds that offer a mix of debt and equity investments. Hybrid funds are also a great option for diversifying an investment portfolio. Investors with the lowest risk appetite tend to stick to debt funds.
- Past performance
Once investors have narrowed down the mutual fund type or category according to their investment objective, horizon, and risk appetite they should look at the historical performance of funds that meet their criteria. While positive past performance is no guarantee of future gains, good schemes tend to outperform most market conditions in the long run. So
- Consistency of returns
Investors looking to invest in an Aditya Birla mutual fund scheme for SIP should take a close look at how consistent the returns of the funds are. For example, a scheme that has generated returns of 10%, 11%, and 13% over three years proves that it offers consistent returns. Another scheme that has generated returns of 10%, 7%, and 33% over three years is far less consistent. Investors should prefer schemes that have a proven record of consistent returns.
Every mutual fund scheme is rated by various rating agencies such as ICRA, CRISIL, and more. The ratings are done on the basis of predetermined parameters. Investors should look at these ratings to understand whether the schemes they have narrowed down have positive ratings. This will help them to further narrow down their choices.
- Parameters for debt funds
If investors are looking at debt funds, they should look at the interest rate scenario and average maturity of the fund. The former is vital as the prices of debt funds are impacted by interact rate movements. The average maturity of a debt fund is the weighted average of all maturities of the securities in the fund.
- Ratios analysis
When it comes to equity funds, investors should analyse ratios such as the Sharpe Ratio and the Alpha. These risk-adjusted measures help the investor evaluate the performance of the specific scheme versus the benchmark and the fund’s peers.
While the Aditya Birla Sun Life AMC has a plethora of mutual fund schemes on offer for investors. Choosing the best fund scheme for SIP can be a highly-individualised affair. Investors need to have a good grasp of their requirements and liabilities, before going on to narrow down the scheme based on past performance, ratios, ratings, and more.