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Investment Simplified > Mutual Funds > A Guide to the Best Mutual Funds: Top Performing Mutual Funds
Mutual Funds

A Guide to the Best Mutual Funds: Top Performing Mutual Funds

Lakshey Bahl
Lakshey Bahl May 2, 2022 9 Min Read
Updated 2022/06/29 at 5:38 PM
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A mutual fund consists of investments which are pooled from different individuals and business investors to buy securities such as stocks, bonds or money market instruments. Mutual fund managers manage these investments from various investors. The portfolio of a mutual fund scheme is designed and managed to meet the investment objectives specified in the outlook.

Contents
What Is Mutual Fund In India?Top Performing Mutual FundsHow Can You Choose The Best Mutual Fund For You?Tips To Consider While Comparing Mutual FundsFAQs

Mutual funds allow the investor to manage portfolios of equities, shares, and other assets. As a result, each shareholder shares equally in the fund’s profits and losses. There is a wide variety of stocks in which mutual funds are invested. The mutual fund’s performance is generally determined by the improvement in the fund’s overall market value.

According to the AUM of India, On March 31, 2012, the growth of the mutual fund industry in India was INR 5.87 trillion. But it has grown to INR 37.57 trillion as of March 31, 2022.

So, it is time that you open yourself up to the Mutual fund investment and seek the profit it provides.

Key Takeaways

  • The mutual fund industry has grown remarkably over the last decade in India.
  • The money invested in a mutual fund is managed by the professional managers and used to buy securities strategically.
  • The different fund collectors charge an expense ratio that involves the annual maintenance fees involved in managing the investment.
  • An investor can also choose to earn a steady flow of income through the dividend option.
  • The best performing mutual funds are those which give investors exposure to investing in a broad and well-managed portfolio.

What Is Mutual Fund In India?

An AMC (asset management company) creates a mutual fund by pooling assets from investors, whether institutions or individuals, to buy securities. Investors are invited to invest in securities, money market instruments, gold, and real estate. In simple words, a mutual fund is a standard investment scheme where an investor can pitch in their contribution, and the amount collected will be invested as per the mutual fund’s investment objectives.

Mutual funds are operated by mutual fund managers by certain sponsors, trustees and the asset management company. They are the holders of the property that benefits the mutual fund unitholders. All the funds are collected by professional managers who are experts in equity and debt funds. They are employed by the AMC, and AMC is ruled by the board of directors and falls under the SEBI Regulation Acts.

Let’s talk briefly about the top mutual funds available in India. Choosing the best mutual fund to invest in can make your head spin, as there are many of the best performing mutual funds provided by several companies.

Top Performing Mutual Funds

Best performing mutual funds can be mainly classified into three different types.

Debt Mutual Funds, Equity Mutual Funds, Hybrid Funds and Money Market Funds.

Debt Mutual Funds

A debt mutual fund is considered as the best mutual fund to invest in now as it is a low-risk investment type. This fund is mainly invested in securities that generate fixed income as the objective of a debt mutual fund is to generate steady returns in a short period of time. The funds are generally allocated towards government securities, less risky fixed-income securities and corporate bonds.

Debt mutual funds can be classified as per the following:

  • Short-term funds
  • Liquid Funds
  • Glitch Funds
  • Dynamic Bind Funds
  • Income Funds

Equity Mutual Funds

Most investments in equity funds are diverted towards equities and related securities. Equity mutual funds are a high-risk investment category ideally suited for investors with a higher risk appetite. An equity mutual fund is the best return mutual fund as the return on investment is higher compared to any other mutual fund type. However, the overall performance of the mutual fund depends upon the market scenario. Equity mutual funds can be classified as per the following:

  • Thematic fund
  • Small-cap fund
  • Mid-cap fund
  • Large-cap fund
  • Multi-cap fund

Hybrid Mutual Funds

Generally, hybrid mutual funds are a mixture of equity and fixed instruments. This type of mutual fund is considered in the medium-risk category as it is a good combination of the stock market and debt instruments. A hybrid mutual fund is best suited for investors who wish to enjoy the benefits of a profitable market with minimum risk. Hybrid mutual funds are classified as per the following:

  • Arbitrage fund
  • Debt Hybrid fund
  • Equity Hybrid fund

Money Market Funds

Money market funds fall under the lowest risk category. It involves minimum risk because the investment typically comprises money market instruments or bank deposits. But you should note that the returns on investment are also relatively low compared to the other mutual fund schemes.

How Can You Choose The Best Mutual Fund For You?

Mutual fund investment may be risky, but it also offers a high rate of returns than any other investment product. But choosing the best mutual fund to invest in is not a simple task as there are several important factors which should be considered.

Here’re some of the essential factors you should always keep in mind before choosing the best mutual funds to invest in.

Identify Your Personal Investment Goal

Before investing in any mutual funds, you must analyze your financial objective and long-term goals. The choice of the mutual fund must align with these investment goals.

Different investors have different financial goals in mind. For instance, some investors look for short term investments, and some look for long term investments. Moreover, some investors may be saving for retirement and some for education. So, it is very crucial to identify your financial goal before you start investing in any mutual fund schemes.

Know Your Risk Profile

If you know your risk profile, it will be much easy for you to know which is the best mutual fund for you. You must also see the risk profile of a scheme to make sure that you are taking the right amount of risk. There are various types of mutual funds with different risk levels, so it is advisable to understand the risk profile.

Asset Allocation

You must understand that risk and returns are directly related. Asset allocation helps to balance risk and return in achieving your financial goals. If your risk level is higher, you can have a higher allocation to equities and vice versa. So, you must invest in a suitable asset class depending on your financial goal and risk appetite.

Know-How Your Fund Will be Managed

Before you invest in a specific mutual fund investment, you should understand how your funds will be managed. Some funds are actively managed by experts, and some are passively managed. The fund manager should have enough expertise to analyze the market and study various sectors before choosing the best return mutual funds.

Analyze The Fund’s Performance

It is essential to know the past and current performance of the fund in which you are planning to invest. You can understand the profit level that the fund has maintained over the years and how it has accomplished its objectives.

Did You Know?

Mutual funds also have a tax savings advantage under Section 80C. Due to its higher returns and short lock-in period, Section 80C of the revenue code allows for a tax deduction on mutual funds. 

Tips To Consider While Comparing Mutual Funds

  • While comparing two schemes, always choose the same year of time of returns. For example, do not compare three years of retrieval of one method and five years of recovery of another. You should compare both with three years or five years of return.
  • Always know the expense ratio because the expense ratio is charged as per the percentage of the fund’s assets under management. A higher expense ratio ultimately reduces the profit earned by the investors.
  • If you compare two plans, then those plans should be growth plans. Do not compare a growth plan with a dividend plan.
  • While comparing mutual funds, choose the one with a considerable fund history of at least five years. This will make sure that your investment remains safe and profitable.

Conclusion

It is effortless to invest in the best mutual funds in India. An investor can either do it online or offline. You just have to go through your Asset management Company website and upload the required documents. Since all activities related to mutual funds are done by professional experts, you can be assured that your investment will be put to good use and provide you with a good return. They can not only just manage your investment, but also build a portfolio for you and direct you through every step of the process.

FAQs

Why should you invest in Mutual Funds?

The mutual funds are known for offering excellent returns in the long tun at nominal cost. So, it is advisable to invest in top performing mutual funds.

What is a Mutual Fund Calculator?

The Mutual fund calculator provides an investor the maturity amount and wealth gained out of the amount invested.

Is investing in mutual fund safe?

Investing in mutual fund is safe if you clearly understand it. You should always choose the right mutual fund, which can help you to achieve your financial goals.

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