Mutual funds is indeed the most hot and happening topic in today’s time. But what does one exactly mean by them? Which are some of the best performing mutual funds? Are there any risks involved? Let us understand every detail from scratch.
What are Mutual Funds?
Mutual funds pool money from the investing public and utilize this money to purchase securities such as bonds or stocks. The value of the mutual fund company is contingent on the performance of these securities. Therefore, if you decide to invest in a mutual fund, you are investing in the performance of its portfolio.
Investing in the best performing mutual funds is an excellent investment option for almost everyone. It is one of the top ways to achieve your financial goals.
Key Takeaways
- An investment vehicle of this type that consists of a portfolio of stocks, bonds, or other securities is known as a mutual fund.
- Annual fees, cost ratios, and commissions paid by highest performing mutual funds may have an impact on their overall returns.
- Small or individual investors can access diverse, expertly managed portfolios through best performing mutual funds in India.
- Most of the best performing funds are frequently used by employer-sponsored retirement plans to invest.
- The various categories that mutual funds fall under describe the different types of securities, investing goals, and return types that they invest in.
List of Best Performing Mutual Funds in India?
Best performing mutual funds in India are classified into different types: equity funds, debt funds, and hybrid funds. If the equity exposure of a mutual fund is more than 65%, it is classified as an equity fund. And if not, the fund is categorized as a debt fund. On the other hand, a hybrid fund invests across equity and debt securities.
Also, while choosing the best performing funds, it is crucial to evaluate their expense ratio. Essentially, the expense ratio is the fee charged by the fund house for managing the fund’s assets. It is expressed in a specific percentage of your fund’s return.
Note: The expense ratio must be as low as possible. A higher expense ratio will only reduce the number of take-home returns of an investor. Additionally, a frequent shuffling of the assets in one’s portfolio may increase your investment cost as the fund house will incur greater transaction costs.
On this note, let’s look at the list of the highest performing mutual funds in India.
Best Equity Mutual Funds
| Name of the Mutual Fund | Expense Ratio (%) | Return since Launch (%) |
| Tata Digital India Fund | 1.99% | 19.23% |
| Aditya Birla Digital India Fund | 2.09% | 11.43% |
| Quant Tax Plan | 0.57% | 20.67% |
| ICICI Prudential Technology Direct Plan-Growth | 0.71% | 23.64% |
| Quant Small Cap Fund | 0.62% | 14.85% |
| SBI Technology Opportunities Fund | 0.90% | 21.50% |
| Motilal Oswal NASDAQ 100 ETF | 0.58% | 21.66% |
| Axis Small Cap Fund | 0.46% | 24.14% |
| Quant Active Fund Direct-Growth | 0.58% | 19.99% |
| PGIM India Midcap Opportunities Fund | 2.00% | 17.37% |
Best Debt Mutual Funds
| Name of the Mutual Fund | Expense Ratio (%) | Return since Launch (%) |
| IDFC Government Securities Constant Maturity Plan | 0.48% | 9.15% |
| ICICI Prudential All Seasons Bond Fund | 0.62% | 9.99% |
| ICICI Prudential Multicap Fund | 2.03% | 14.35% |
| DSP Healthcare Fund | 0.80% | 24.27% |
| HDFC Credit Risk Debt Fund | 0.85% | 8.36% |
| Kotak Dynamic Bond Fund | 0.22% | 8.96% |
| Edelweiss Government Securities Fund | 0.69% | 8.50% |
| IDFC Government Securities Fund Constant Maturity | 0.48% | 6.47% |
| Aditya Birla Government Securities Fund | 0.94% | 8.61% |
| Nippon India Nivesh Lakshya Fund Regular Growth Plan | 0.52% | 8.33% |
Best Hybrid Funds
| Name of the Mutual Fund | Expense Ratio (%) | Return since Launch (%) |
| Quant Multi-Asset Fund | 0.56% | 10.11% |
| Kotak Multi-Asset Allocator (Fund of Fund) | 0.20% | 14.19% |
| Quant Absolute Fund | 2.31% | 16.85% |
| HDFC Retirement Savings Fund | 2.10% | 17.50% |
| SBI Equity Direct | 0.84% | 14.85% |
| BOI AXA Mid & Small Cap Equity | 2.55% | 7.66% |
| ICICI Prudential Multi-Asset Fund | 1.17% | 15.63% |
| Baroda BNP Paribas Aggressive Mutual Fund | 0.64% | 13.11% |
| BOI AXA Equity Fund | 1.55% | 13.13% |
| ICICI Prudential Thematic Advantage Mutual Fund | 1.62% | 14.54% |
Best Liquid Mutual Funds
| Name of the Mutual Fund | Expense Ratio (%) | Return since Launch (%) |
| Quant Liquid Plan | 0.29% | 4.34% |
| Navi Liquid Fund | 0.15% | 4.37% |
| Baroda BNP Paribas Liquid Fund | 0.19% | 4.01% |
| Bank of India Liquid Fund | 0.15% | 4.01% |
| Mahindra Manulife Liquid Fund | 0.15% | 4% |
| JM Liquid Fund (Direct) | 0.15% | 3.97% |
| Aditya Birla Sun Life Liquid Direct Plan | 0.21% | 3.97% |
| IDBI Liquid Fund | 0.13% | 3.97% |
| Mirae Asset Cash Management Fund | 0.17% | 3.96% |
| HSBC Cash Fund Growth | 0.12% | 3.96% |
Best Tax Saving Mutual Fund
| Name of the Mutual Fund | Expense Ratio (%) | Return since Launch (%) |
| Quant Tax Plan Growth | 0.57% | 42.78% |
| Bank of India Tax Advantage Direct Growth | 1.37% | 27.38% |
| IDFC Tax Advantage (ELSS) Direct Plan Growth | 0.75% | 26.09% |
| Canara Robeco Equity Saver Direct Growth | 0.60% | 25.08% |
| Parag Parikh Tax Saver Fund Direct Growth | 0.84% | 24.89% |
| Mirae Tax Saver Fund- Direct Growth | 0.56% | 23.50% |
| Unity Long Term Equity Fund | 1.56% | 22.54% |
| PGIM India ELSS Tax Saver Fund | 1.03% | 21.78% |
| Kotak Tax Saver Direct Growth | 0.75% | 21.77% |
| DSP Tax Saver Direct Growth | 0.82% | 21.52% |
Who Should Invest in Best Mutual Funds?
Here are a few reasons that best explain why should you invest in some of the best performing Funds:
- To compound money uses better: Earning returns off of previous returns is called compounding. Compounding causes your investments to increase more quickly over time than they would if you invested them earlier. Therefore, the earlier you begin investing, the better mutual fund returns you will receive when you need the money to achieve your goal. Highest performing mutual funds are a simple investment option as well. In your twenties and thirties, you won’t need money for complicated things. Mutual funds are a great option for young investors to invest in because they are simple to purchase, and they will benefit from the power of compounding in twenty-thirty years.
- Better risk appetite: An investor must invest in accordance with his or her risk tolerance. And it is true that younger investors have a higher tolerance for risk and might choose to maintain an aggressive financial strategy; as people become older, their risk preferences become more conservative. When you’re young, you have more time to make changes to your financial plans in case something goes wrong, making the turbulent market moves easier to swallow.
- Add financial discipline: While you begin investing when you are young, it demonstrates your dedication to your financial goals. The best time to develop the habit of being financially disciplined is in your early years of life. Young investors might reach financial maturity considerably earlier and accomplish their objectives. Investments should have goals-based objectives and distinct entry and exit points. Start investing in highest performing mutual funds on a regular basis in small amounts to develop financial discipline. It makes it possible for you to invest frequently and develop a disciplined spending routine.
- Save taxes: Through equity linked saving schemes (ELSS), mutual investments might assist you in reducing your tax liability. Every financial gain, including the profits on stocks, mutual funds, and bank fixed deposits, is taxed in addition to regular income. Compared to money invested in stocks, money invested in fixed income instruments is taxed differently. Tax-efficient investing doesn’t have to be difficult, but it does require some preparation. Better tax awareness has the ability to increase your after-tax profits, even though taxes shouldn’t ever be the main factor in a strategy for investing.
- Generate future wealth: Compared to long-term markets, short-term markets exhibit much greater up-and-down volatility. When you begin investing in highest performing mutual funds at a young age, you allow your money time to grow into a larger corpus. You can adjust your investment strategy over a longer period of time based on your financial intentions. The equities mutual funds may offer superior returns over a longer time horizon than over a shorter time horizon, it is highlighted. Over time, best performing mutual funds can aid in your wealth accumulation.
How to Choose the Best Performing Mutual Funds in India?
To secure maximum return on your investment, you must shortlist best performing mutual funds in India for the last 10 years. And here’s how you can do it.
· Scan the mutual fund’s track record
The best performing mutual funds in India generally have an excellent track record of yielding high returns over the past few business cycles. Therefore, it is crucial to check out the fund’s previous performance before investing. In addition, when the market is down, you must evaluate the fund’s performance as most top performing funds are not much affected by market movements.
· Assess the financial ratios
When it comes to identifying the top performing funds, evaluating the financial ratios such as alpha and beta is crucial as they provide insights into a specific fund’s risk-return analysis.
For instance, the alpha ratio indicates the additional return that a particular mutual fund has generated compared to the benchmark. Thus, funds with a higher alpha are considered a more worthwhile investment.
· Purpose of investment
Different investors have different investment objectives. Thus, it is advisable to understand your exact investment purpose before putting your money on any of the highest performing mutual funds. This will also help you gauge if your objectives are in sync with the mutual fund scheme proposed to you by a fund house.
· Performance of fund managers
Fund managers are those who manage an investor’s money. As a result, the experience and expertise of a specific fund manager play a pivotal role in generating better returns. A good fund manager holds considerable knowledge of market trends. Consequently, he can identify the best opportunities and make greater returns on investments.
Did you know that you can start your mutual fund investment as low as INR 500? Then, using a systematic investment plan (SIP) tool, you can make monthly investments in the fund. If you do this for a long time, your money will undergo compounding and generate excellent returns in the long run. At the end of January 2022, the monthly SIP contribution stood at 11,517 crores.
Read More: Types of Mutual Funds
Advantages of Investing in Best Mutual Funds
Here are the following advantages of investing in a few best performing mutual funds:
- Liquidity: The ability to redeem units at any moment is the key advantage of investing in a mutual fund for the investor. Mutual Funds, unlike Fixed Deposits, allow for flexible withdrawal, but it’s important to consider things like the exit load and pre-exit penalty.
- Expert Management: A beginner investor could lack knowledge and information on where and how to invest. The professionals run and manage best performing mutual funds. The professionals gather funds from clients and distribute them among various securities, enabling the investors to make a profit. The professional manages all the hurdles and maintains an eye on prompt entry and exit. One simply needs to invest, and they can rest easy knowing that the rest will be handled by those who are the best in their industry. One of the most significant benefits of best performing mutual funds in India is this.
- Diversification: An investment’s value might not increase or decrease simultaneously. When one investment’s value is rising, another one’s value could be falling. As a result, there is a lower likelihood that the portfolio’s overall performance would be volatile. Diversification lowers the risk associated with creating a portfolio, thereby lowering the investor’s risk. Since highest performing mutual funds are made up of a variety of securities, investor interests are protected in the event that one of the other securities they purchased declines.
- Flexibility: The most significant benefit of best performing mutual funds, among others, is their flexibility. To invest in a mutual fund, investors do not need to contribute a sizable sum of money. Investments may be made based on cash flow. If you are paid regularly, you should consider a systematic investment plan (SIP). Depending on your budget and convenience, a fixed amount is invested through a SIP either monthly or quarterly.
- Safety & transparency: All products of a Mutual Fund have labels now that SEBI norms have been implemented upon them. This implies that there will be color coding for all Mutual Fund plans. This makes the entire investing process clear and safe by assisting the investor in determining the level of risk associated with his investment.
Read More: What are Gold Mutual Funds?
Risks Associated With Investing in Best Mutual Funds
There’s risk involved with investments made in any best performing mutual funds. Therefore, potential investors should think about the following risk concerns before making an investment.
- Non-guaranteed returns: Investors should be informed that there is no assurance of any income distribution, returns, or capital appreciation while investing in a mutual fund.
- Security-specific risks: There are numerous unique threats that concern personal security. Examples include the potential for a firm to miss a payment on the coupon and/or principal of its debentures and the effects of a decrease in a company’s credit rating.
- In-general market risks: There will always be some market risk involved in the purchasing of securities. As a result, a mutual fund may be vulnerable to shifting market conditions as a result of: general interest rate movements; broad investor sentiment; global, regional, or national economic developments; governmental policies or political conditions; development in regulatory framework, law, and legal issues; and external shocks (e.g. natural disasters, war and etc.)
- Loan financial risk: Investors should be aware of the following if a loan is taken out to pay for the purchase of units in a mutual fund: borrowing increases the possibility of both gains and losses; if the value of the investment falls below a certain level, the financial institution may ask investors to increase the collateral or reduce the outstanding loan amount to the required level; the cost of borrowing may change over time depending on changes in interest rates; and the risks.
- Non-compliance risks: This is the risk that the management currently and potentially poses to the mutual fund and the interests of the investors by failing to comply with applicable laws, rules, regulations, recommended practices, and internal policies and procedures.
Taxation of Best Mutual Funds
The fundamentals of mutual fund taxation are much simpler to understand when they are further broken down into smaller pieces. So let’s start by taking a look at the three variables that affect the tax liabilities of mutual funds.
- The kind of financing Mutual funds are divided into two groups for tax purposes: equity-oriented mutual funds and debt-oriented mutual funds.
- The nature of the gains (dividends or capital gains): A capital gain is a profit you make when you sell a capital asset for more money than it cost you, but a dividend is a portion of earnings the mutual fund house distributes to the scheme’s investors without the investor having to sell the asset. In the section that follows, it is explained what each of them is and how it is taxed.
- The amount of tax you’ll pay on your capital gains depends on the holding period. Less tax will be due if your holding term is longer. Because India’s income tax laws favor longer holding times, keeping your investment longer lowers your tax burden.
Conclusion
Investing in best performing mutual funds is an excellent option to grow your financial portfolio and boost your wealth. This is our roundup of the 10 best performing mutual funds in India. Depending on your financial objectives, risk appetite, and investment duration, you can select the right one.
Read More: Difference Between SIP and Mutual Funds
FAQs
The top-performing mutual funds are known to offer incredible returns on investment in the long run.
You don’t require extensive market knowledge to invest in the best performing mutual funds. Instead, you can get in touch with a good fund manager to guide you through the process.
PPFAS mutual fund is growing at a feverish pace in India. It registered the highest AUM growth at 178% in 2021.
The best mutual funds to invest in this year are:
· Axis Midcap Fund
· SBI Equity Hybrid Fund
· UTI Flexi Cap Fund
· Parag Parikh Long-term Equity Fund
· Kotak Emerging Equity Fund
· Mirae Asset Hybrid Equity Fund
· SBI Small Cap Fund
Mostly, all mutual funds are liquid investments. Thus, you can withdraw your amount at any time. However, few funds come with a specific lock-in period.
Yes, mutual funds are a safe investment, provided you understand them well. You can invest in equity funds if you don’t wish to be bothered by short-term fluctuations.
To name some, there are: Mahindra Manulife Multi Cap Badhat Yojana Fund, Axis Midcap Fund, Parag Parikh Flexi Cap Fund, etc.
Long-term investments aid investors in accumulating wealth. The equity mutual fund is the finest investing choice over the long run. Invest in long-term mutual funds with customizable investment plans that are recommended by algorithms and science.
To name some, there are: Motilal Oswal Long Term Equity Fund, SBI Enquiry Hybrid Fund, Sundaram Aggressive Hybrid Fund, etc.
