What are Top Mutual Funds?
A mutual fund is a type of organization that collects money from people and invests it in securities like stocks, bonds, etc. Basically, a person is called a manager who manages the money collected from people.
They are free to invest in a stock that they find attractive. After reading the complete blog you will be acquainted with all you need to know about top mutual funds.
Points to Remember While Investing In Top Mutual Fund
If you want to live a better life in the future then investing money is the best alternative. Mutual Fund becomes the obvious choice for most people.
While investing, you should ensure your investment objective aligns with the fund’s objectives.
Most of the fund accepts investment of lump sum money or in the form of a sip. In lump sum, you have to invest money all at once and in sip you get the convenience to invest money after a specific time.
Investing in sip mode is recommended as it is less risky for beginners. Invest for the long term and let your money make more money for you.
Top Mutual Funds
|Min. Investment Expense Ratio|
|Parag Parikh Flexi Cap Fund||20.85%||26.90%||₹ 1000 0.79%|
|Axis Blue Chip Fund||18.54%||19.60%||₹ 500 0.52%|
|Nippon India Large Cap Fund||13.96%||15.80%||₹ 100 1.1%|
|Axis Small Cap Fund||32.88%||22.03%||₹ 500 0.49%|
|Tata Large and Mid Cap Growth Fund||14.37%||19.69%||₹ 150 0.94%|
How to select Top Mutual Fund?
1. See the expense ratio of top mutual funds
The expense ratio is basically the cost of managing the fund.
Even if you invest in the best mutual fund but its expense ratio is high then it can significantly affect your returns.
So, you can invest in a passive mutual fund that has a lower expense ratio compared to an active mutual fund. The expense ratio varies from 1 to 3%.
2. See the management of the best mutual funds
Management of the fund includes the manager and another group of smart people who choose to invest on behalf of you. They are like drivers of your vehicle any mistake can put your money at risk.
So, choose your driver wisely(I mean manager). If the manager is able to recognize the good opportunities in the market then only investors like you and me can earn profits.
3. Understand your risk appetite
The stock market gives high returns but remembers it comes with equal risk. You might be a defensive investor so you should choose the fund which invests in less risky assets. If you can take a high risk like me then you should invest in a high-growth fund.
4. Check the track record of the top mutual funds
Just because the manager of the fund is good or it is recommended by your uncle doesn’t give a guarantee of a good return.
The good track record of the fund manager shows the credibility of the fund. Don’t invest by seeing the short-term return of the fund.
Anyone can give a good return in the bull run but the real potential of a fund manager is proven in the bear market.
Hence if you invest in a fund with a good track record then the chances of consistent returns increases.
5. Check the financial ratio of the best mutual fund
Ratios play a very important role while finding the best mutual fund. It helps to find the appropriate fund as every fund is not suitable for individual investors.
For example, the deviation ratio helps to determine the volatility. We can understand the depth of risk in a specific fund with help of this ratio.
You can also read our blog on top financial ratios.
Advantages of Investing in Top Mutual Fund
1. Managed by the top mutual fund experts
The biggest advantage of investing in the top mutual fund is that your money is managed by experts, who have proven themselves in different market cycles.
2. Well diversification
When you are investing in a single fund then also you are investing in a basket of stocks with well-diversified sectors.
Most of the mutual fund’s managers allocate 60 to 70% in stocks and 30% in bonds which helps to minimize the losses at odd times.
3. Well regulated
Mutual funds are well regulated by the Security Exchange Board of India or SEBI. They have to follow all the rules set by the Sebi.
Every fund needs to disclose its portfolio at the end of every month. They should clearly tell the risks related to the fund and need to mention all necessary information in their reports.
4. Easy to invest
Due to the Demat account, we can easily invest in a fund with few fingertips. Various discount brokers like Zerodha, and Groww have made it super easy to invest with competitive pricing.
You can invest a Lum sump amount or by SIP mode as per your convenience.
5. High Liquidity
Liquidity is high in mutual funds. You can withdraw money on the same day also. Most mutual funds hold cash of 3 to 5% of their assets in their hands.
Types of Best Mutual Fund
1. Debt mutual fund
Debt mutual funds invest primarily in fixed income securities, bonds, treasury bills, etc. Compare to the equity fund it possesses low risk and low returns.
2. Index fund
It is suitable for most people as an Index mutual fund directly tracks the market index. If the market goes up then investment in the index in the fund will also go up and vice versa.
The expense ratio is less as compared to actively managed funds as managers don’t have to research much.
3. Large-cap mutual fund
A large-cap mutual fund invests among the top 100 mutual funds. The risk is lowered as compared to mid and small-cap.
4. Mid-cap mutual fund
It invests among the top 101 to 250 companies. Volatility is higher than a large-cap fund, hence chances of higher returns are also more.
5. Small-cap mutual fund
It invests in the next top 250 companies. The volatility is very high in the small-cap fund. As the companies are in their initial phases so, the scope of generating multifold returns is also very high.
Flexi cap mutual fund
It is one of the best categories of mutual funds. As it allows managers to invest in all of the market caps without any restrictions.
Fund managers can use their fullest intelligence to take maximum profits as they can invest in any sector in any proportion.
At last, I would like to say choose your top mutual fund wisely by doing thorough research. Focus on its long-term returns rather than short term returns and hold them for long time.
I wish you a happy investing!