Best Mutual Funds
Mutual funds are an investment vehicle that pools money from various investors and invests the corpus into different assets, such as equity mutual funds, debt mutual funds and hybrid funds. These mutual funds have different objectives and risk profiles. In addition, the best mutual funds for you will depend on your investment objective, investment horizon and risk appetite.
Professionally managed
Affordable and convenient
Liquidity
Risk diversification
Equity Mutual Funds
These mutual funds enable investors to grow their capital by investing in stocks of different companies. They offer greater returns than traditional fixed deposits and government bonds. However, they are susceptible to market changes, offering better returns and risks.
List of Best Equity Mutual Funds to Invest
Debt Mutual Funds
These funds primarily invest in debt instruments, such as corporate and government bonds, money markets, etc. Debt funds are less risky than equity funds but offer moderate returns. In addition, these funds are ideal for investors wanting lower risk and seeking stable investment options.
List of Best Debt Mutual Funds to Invest
Hybrid Mutual Funds
These funds are a blend of equity and debt funds that invest in a diversified portfolio of equity and debt instruments. These offer higher returns while minimizing the risk factor, making it ideal for investors with moderate risk tolerance and seeking diversified investment options.
List of Best Hybrid Mutual Funds to Invest
Why Add the Best Mutual Funds to Your Portfolio?
- Higher return rate than savings bank and fixed deposits
- Low-cost investment option
- Ideal for fulfilling financial goals
- Diversified portfolio to manage risk:
Benefits of Investing in Funds
Investing in mutual funds with good returns has several benefits. The following are the advantages of investing in mutual funds:
Professional Management
Mutual funds are managed by fund managers who usually have experience, expertise, and resources to research and analyse the market to decide what to buy, sell. They monitor the investments regularly and rebalance accordingly to fulfil the fund’s objectives. This makes mutual funds ideal for first time investors and/or passive investors.
Well Regulated
The Securities and Exchange Board of India (SEBI) monitors and regulates mutual funds under the SEBI (Mutual Funds) Regulations, 1966. It has set rigid rules and regulations to protect investors by incorporating fair valuation principles and transparency with a proper risk mitigation framework.
Liquidity
You can redeem the open-ended mutual funds on any business day to fulfil your financial requirements. Upon redemption of the units, the amount gets credited to your bank account within a few days, depending on the mutual fund. In the case of close-ended mutual funds, you can redeem the gains after maturity.
Risk Diversification
Affordability
Investing in mutual funds is more affordable than buying a financial instruments individually since mutual funds pool money from a large number of people allowing you to participate in market activity with little investment
Tax Benefits
Investing in mutual funds is taxed on the basis of tenure and investment types. However, the ELSS mutual funds offer tax benefits up to Rs. 1,50,000 per financial year. These funds offer greater returns than other tax-saving instruments like FDs, PPFs, etc
Who Should Consider Investing in the Best Mutual Funds?
Mutual funds offer higher returns than other investment schemes, making it an ideal investment instrument. The following categories of investors can seek the best mutual funds to invest in:
Investors with Financial Goals
Investors wanting to fulfil their investment goals can invest in mutual funds according to their preferences. They can invest in top-performing mutual funds which deliver better returns than other investment options.
Investors Seeking to Invest Regularly
You can invest in mutual funds regularly using a Systematic Investment Plan (SIP). Investors can invest small amounts at regular intervals to achieve their investment goals.
Investors Wanting Better Returns Than Savings
Investing in the best mutual funds offers better returns than traditional savings options. Investors can invest in hybrid funds to build wealth by generating higher returns and safeguarding their principal.
Points to consider before investing in Mutual Funds
Investment Goals
You must analyse your investment goals before investing in mutual funds. It will help you choose the top-performing mutual fund according to your investment goals. In addition, it will help you invest in the fund that aligns with your risk tolerance and investment horizon.
Investment Horizon
Investment goals and investment horizons are related to each other. You must assess your investment horizon before investing in the best mutual funds. You must invest in the funds for the long term to earn the expected returns and mitigate the risk.
Fund’s Performance
Before investing in mutual funds, you must assess the historical performance of the funds. Use the mutual fund comparison tool in order to compare returns with other funds. You must analyse and compare the performance against the benchmark and category to analyse their future returns. It will help you choose the fund offering better returns with low-risk factors.
Net Asset Value
It refers to mutual funds’ market value per unit, a crucial factor for many investors. Mutual funds with higher NAVs are high-priced and may offer less returns than funds having lower NAVs. However, mutual funds with higher NAVs invest in superior bonds and stocks, making them more reliable than funds with lower NAVs.
Expense Ratio
The fund managers research and analyse the market and manage your units on your behalf. Hence, they charge fees for managing, distributing, promoting and administrating mutual funds, called expense ratio. You must seek to invest in mutual funds with lower expense ratios, enabling you to minimise the charges.
Risk Tolerance
Investing in mutual funds comes with some risk factors. However, the risk factors depend on the type of funds you are investing. You must have a moderate or high-risk tolerance to invest in mutual funds, as they are subject to market fluctuations.
Limitations of Investing in Mutual Funds
Mutual Funds are a great way to participate in investment activity but you should be aware of its drawbacks too
Market Risk
Mutual funds are subject to market risk as the value of a fund's holdings can fall as the market slide, impacting the value of your investment. Diversification within a mutual fund can mitigate this risk to some extent, but it cannot eliminate it entirely.
Risk of Underperformance
While mutual funds are many times able to outperform benchmarks or indices, there is no guarantee they will in the future and some mutual funds are not able to beat benchmark indices. Several factors can lead to underperformance in a given mutual fund. You should do extensive research into the fund you are planning to invest in before making any decision.
Management Fees and Expenses
Mutual funds have charges associated with them, which cover the cost of managing the fund and other administrative expenses and are called expense ratio and that can vary widely among funds. High fees can significantly eat into your investment returns over time, even in funds that offer high returns
Who should invest in Mutual Funds?
Investing in the best mutual funds is a good option for investors wanting to diversify their investment portfolio and generate higher returns. You can invest in these funds to earn expected returns in the long period and mitigate the risk factor. In addition, you can choose the type of mutual fund investment according to preference, risk tolerance and investment horizon.
Frequently Asked Questions
Cap funds are often run by well-reputed AMCs which offer steady and consistent results and have less volatility. Some of the best-performing mutual funds you can invest your money in 2024 are:
- Nippon India Multi Cap Fund Direct Growth
- HDFC Flexi Cap Direct Plan Growth
- Quant ELSS Tax Saver Fund Direct Growth
- Aditya Birla Sun Life PSY Equity Fund Direct Growth
Your returns from mutual funds will be taxed under two categories.
- Under Capital Gains: Short-term capital gains at 15%; Long-term capital gains (over Rs. 1 lakh) at 10%.
- Tax on Distributed Income Dividend Option: At applicable income tax slab
Yes, mutual funds have certain risks involved with them, but they are not as high as mid cap or small cap funds. For this reason, the returns on these funds are stable and suitable for conservative investors.
As an investor, you should look at the following features of a mutual fund before making a decision.
- Historical performance of the fund manager
- Expense ratio
- Past performance of the MF
- Fund portfolio.
Try to invest your money in a mutual fund for a minimum of 3 to 5 years to get a good return after the tenure ends.
The average return on a one-year mutual fund is generally 16.15% depending on the market. However, as the market is volatile, you cannot expect to get the same return as you got in the previous years.
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