Sector Mutual Funds

If you are an investor looking to invest in the markets, chances are you might have stumbled across the term – mutual fund investment. All investors, new or seasoned can enjoy the benefits of mutual fund investments by choosing the right type of mutual fund suitable for their portfolio. An investor can choose to invest in these investment options through a one-time investment of lumpsum investments or regular investments through SIP (systematic investment plan). SIP mutual funds can help an investor to invest in the markets in a systematic manner and earn significant returns on their investments over a prolonged period. In this article, we will understand how SIP mutual funds can help you earn more with lesser risk. But, before we delve into that let’s quickly recall what SIP investments are.

What is SIP?

SIP is an investment tool that allows investors to invest in mutual funds in a regular and systematic manner. Under SIP mode of investment, an investor chooses to invest a predetermined sum of money in their desired mutual fund schemes at regular intervals for a given duration. The investor has the flexibility to change the funds they are investing in, the investment amount, the investment duration, the frequency of their intervals, or the type of SIP they wish to go forth with. Remember, you do not invest in SIP. Instead, you invest in mutual funds with the help of SIP mode of investment.

How to earn more with lesser risk with the help of SIP mutual funds?

Just like any other mutual fund investments, SIP mutual funds are subject to market risk as well. Hence, experts often advise their investors to look out for different parameters and choose the right mutual fund investment plan and type of SIP for their portfolio. Though average annual returns might be a good place to start, it might not be a sufficient factor to help you choose the right type of investment. Some parameters that you can consider looking are sharpe ratio, average returns against underlying benchmark and peer funds, average returns during different market periods, etc. Let’s understand what is sharpe ratio and how to use it efficiently to increase your chances of earning high returns with lesser risk.


Sharpe ratio is an investment tool that helps to measure the performance of a particular mutual fund scheme and calculate the risk-adjusted returns on their investments. In simpler terms, sharpe ratio helps an individual determine how much extra returns an investor is expected to earn on their investments when adopting extra level of risk. Sharpe ratio might prove to be extremely useful among investors who wish to choose between different mutual fund schemes with similar returns but varying risk profiles. Before you use sharpe ratio to determine the right mutual fund investments plan for your financial portfolio, it is important that you understand that the schemes compared using this formula must belong to the same mutual fund category. For instance, you might not get a clear picture if you compare a mid-cap stock against large-cap stock using the Sharpe ratio. Happy investing!