Most experts agree that mutual funds rank amongst the best tools that generate a high return, save tax and provide much better results than traditional investments like Fixed Deposits. It is good that you finally want to start investing in these funds, but given the wide variety of available options in the market, we can only imagine the confusion one faces before settling for the right option. Fret not, for we have curated the list of best mutual funds to invest in India. Read on to find out more about what works, what does not, and which options you should choose.
Why Mutual Funds?
Mutual funds perform better than generic methods of investments because they are professionally managed schemes. Seasoned market experts create these pools of investment and this is why the average returns of mutual funds are much better. Asset Management Companies (AMCs) generally manage these schemes and the money thus accumulated gets pooled into a class of bonds or stocks. This piece gives you a clear idea of the best new mutual funds in India.
10 Best Mutual Funds in India
Without further ado, let''''''''s jump right into the best mutual funds to invest in India. Our list of top mutual funds is not from a single type of funds, but a collection of five variants.
DSP Midcap Fund
The investments that you make through the DSP midcap fund goes to small companies. When invested for a period longer than five years, this fund could easily tackle economic changes such as high inflation.
Parag Parikh Long Term Equity Fund
A long term favourite of many investors, this mutual fund keeps outperforming its competitors in many areas. One of the key benefits of opting with this is the powerful downside protection that you can count on.
Axis Midcap Fund
Critics of this fund often suggest that in 2020, this fell harder than others on the list of top mutual funds. However, its recovery has always been sharper than most others. This fund largely invests in green and orange stocks.
SBI Equity Hybrid Fund
A hybrid scheme that invests both in debt and equity, provides greater long term benefits to conservative investors looking to invest from 5 -7 years.
SBI Small Cap Fund
Small cap funds are helpful when trying to create long term wealth. This is also ideal for people looking to plan a family within a decade. You can have sizable wealth to support your spouse and children with this fund, if done right.
Mirae Asset Hybrid Equity Fund
This fund is rated high risk by experts. However, its returns are equally rewarding. Even during the worst periods of the stock exchanges, this fund did not sink down as much as speculated.
Kotak Standard Multicap Fund
From the house of Kotak Mahindra, this equity fund scheme is pointed towards specific market segments. This fund has given good returns along the lines of 33% - 45% in the last 1-3 years.
Axis Bluechip Fund
This is another fund that can help create long term wealth for you. Over the years, this has proven its mettle through regularly high returns.
Axis Smallcap Fund
Axis small cap is managed by a leading team of fund managers. This scheme focuses on small companies that show growth in the long run. So far, this fund has not let its investors down.
Mirae Asset Large Cap Fund
This fund invests 80% of the capital in the top 100 companies. The greatest benefit is that this is relatively stable because of its diversified portfolio spanning multiple sectors.
However, this list certainly doesn’t end here. Based on your portfolio and several factors, you should research the funds and select the ideal option from the multiple types of mutual funds in India.
Which Type of Mutual Fund Should You Invest in?
The difference in preferences and portfolio make a type of fund appealing to a specific category of investors and a poor choice for the other. For instance, hybrid schemes, considered to be aggressive, are good for people entering the market with no or low prior experience. This is primarily the case because such schemes offer a balance of debt and equity investments, and therefore, can be considered less risky than ones that invest solely in shares. Even in comparison to the best debt mutual funds in India, these hybrid schemes can offer better returns in long term.
On the other hand, schemes such as Large Cap mutual funds are suggested if you want to avoid volatility. Although playing safe comes at the cost of low returns and growth, if you want to reduce the risk of losing money, this is a good option out of the different types of mutual funds in India. The only downside here is low returns, while the upside is better stability.
However, if you are not looking for either of these extremes, the ideal option turns out to be diversified Equity schemes. Also known as multi-cap mutual funds, these are some of the top mutual funds in India. These funds are aimed at specific companies selected by AMCs or the fund manager after research. A newbie can benefit easily as and when these sectors start profiting.
If you are targeting higher returns, the above categories would not satisfy your requirements. Your best bet is a mid-cap or small-cap fund scheme, a lot of which are arguably amongst the best new mutual funds in India. As the name suggests, these schemes pool funds for companies with mid-sized or small market share. These would likely return higher results in the long run.
The Right Strategy
When it comes to the right investment strategy, no one should take the ‘one size fits all’ approach. Good stock mutual funds are rated higher than their underperforming counterparts and AMCs pitch these to their clients more often. Nevertheless, your risk capacity and portfolio are prime deciders of your choice.
Systematic Investment Plans (SIPs) should ideally not begin with a short-term gain in mind. It is recommended that SIPs are planned and continued for at least 3-5 years if you want to see worthwhile gains.
It is difficult to avoid capitalising on a bull run - we’ve all been there. However, it should be kept in mind that putting a large chunk of your funds in equity funds with peak performance is a highly risky move. Experts suggest letting the market correct itself before making this choice.
A rookie mistake that most investors make is to withdraw their SIP plans when they see diminishing returns. This is one of the worst mistakes one could make
The compounding effect exponentially grows your ROI, if a growth option is chosen in mutual funds.
It is alluring to move funds from debt mutual schemes to FDs for a fixed return on investments. However, it is usually not considered a wise move. This is because the returns from fixed deposits fall under the umbrella of taxable income. According to your tax slab, you would have to pay the Income Tax department, a certain amount. On the contrary, the best debt mutual funds in India offer tax savings when kept for 3 or more years. Not only would you incur less taxation, but you also get to keep the returns in full!
As the cliched saying goes, Mutual funds, indeed, are subject to market risks. If you have never delved into this world, it is always beneficial to get an expert opinion on the matter before putting your money into the game. This is much better than just going all in and hoping that you are choosing good stock mutual funds by instinct. These schemes continue to promise good returns. However, you also risk losing your money if a complete understanding of the scheme has not been acquired. It is good to start slow, invest the kind of money you do not fear losing and build your way up, once you know how the market works.