What is a Mutual Fund?

A mutual fund is a financial pool of funds collected from numerous investors with collective investment in valuable securities like stock, bond or any other asset. Each co-investor holds a stake in the fund which is his proportionate share of the ownership of the real investments.In this case, the goal is to encash returns for purposes of evaluating the properties of the securities within a portfolio.

Why Invest in Mutual Funds?

• Diversification: Like most other mutual funds, the propounded theory avails the opportunity to investors to diversify their portfolio without necessarily demanding huge amounts of money.

• Professional Management: Funds are run by professionals; hired professionals make financial solutions available.

• Liquidity: Many mutual funds are very liquid, which implies that you can sell them on any given period that you may wish to do so.

• Accessibility: There is a wide range of mutual funds wherein you can invest such as HDFC Mutual Fund, ICICI Mutual Fund, SBI Mutual Fund and many others.

Types of Mutual Funds in India

• Equity Mutual Funds: The business should engage in the purchasing of stocks with the hope of gaining high returns in the long run as opposed to in the short run.

• Debt Mutual Funds: You may invest in bonds or fixed income securities because they are relatively safer products to invest in and they give higher and more predictable returns than equities.

• Hybrid Mutual Funds: A mix of both equity and debt instruments suitable to the moderate risk investor.

• Index Funds: Choose one particular market index like Nifty or Sensex.

• ELSS (Equity-Linked Savings Scheme): Exempt mutual funds that also have the added advantage of tax exemptions under section 80 C.

Best Mutual Funds to Invest in 2024

• Best Large Cap Mutual Funds: These funds invest in large and mature organizations Through this investment, investors hope to achieve reasonable returns on their investments over the long-term. A few recommendations include; ICICI prudential, HDFC, SBI among others.

• Best Mid Cap Mutual Funds: High risk high return mid-cap funds are suggested to be bought from Tata, Axis and Mirae Asset.

• Best Small Cap Mutual Funds: Those investors who are willing to take slightly higher risk can look at small-cap funds floated by Parag Parikh, DSP, and Motilal Oswal.

Top 5 Mutual Funds in India (2024):

• SBI Bluechip Fund

• HDFC Equity Fund

• Mirae Asset Large Cap Fund

• Axis Bluechip Fund

• Nippon India Small Cap Fund

How to Invest in Mutual Funds?

• Direct Investment: You can invest directly from the website of the Asset management company or through mobile Apps like SBI Mutual Fund App, HDFC Mutual fund mobile App or Axis mutual fund App.

• Through Distributors: You can invest through mutual fund distributors or through online leaders like Groww, Zerodha Mutual Fund, or MoneyControl.

SIP (Systematic Investment Plan) in Mutual Funds

An SIP means you invest a particular sum in mutual funds at fixed periodic intervals, thus achieving phenomenal rupee cost averaging and benefits of compounding. The list of recommended mutual funds for SIP investment for the selection of the best mutual fund is the HDFC Mutual Fund SIP, Axis Mutual Fund SIP and SBI Mutual Fund SIP.

SIP Mutual Fund Calculator: To calculate your returns use mutual fund SIP calculators such SBI Mutual Fund Calculator and HDFC Mutual Fund SIP Calculator.

Mutual Fund Returns and Taxation

• Taxation on Mutual Funds: Income from mutual funds are liable for the payment of capital gains tax. STCG tax is applied if the fund is sold within 3 years while LTCG tax is charged after 3 years.

• XIRR (Extended Internal Rate of Return): This is used in computing the returns on mutual funds, over arbitrary intervals of time.

Mutual Fund Performance & Calculators

• Mutual Fund Return Calculator: Money Control and Groww Mutual Funds give access to calculate the returns for the investments that have been made.

• Mutual Fund NAV (Net Asset Value): The NAV is the price at which a share of a mutual fund is to be bought in and sold. Track your NAV to know whether your investment options are good or not.

How to Choose the Best Mutual Fund?

That is why while choosing a mutual fund, the following criteria should be considered:

• Fund Type: Equity, debt, hybrid and tax saving funds should be chosen depending upon your risk appetite.

• Expense Ratio: Invest in low cost funds to avoid high expenses from the fund company.

• Past Performance: The fund performance has to be assessed over the last 5 to 10 years.

Recent online fund tracking applications include MoneyControl Mutual Funds, Groww, and Zerodha help compare various funds in terms of returns, risks, etc.

Mutual Fund SIP vs Lump Sum Investment

• SIP: Suits novices to a tee, more strategic of an investment over the long term.

• Lump Sum: Recommended for the investors who wish to make a single lump-sum investment and take advantage of the right timing.

Best Mutual Fund Apps in India

• HDFC Mutual Fund Mobile Application

• SBI Mutual Fund Mobile App

• Groww Mutual Fund App

These apps allow you to invest, track, and manage your mutual funds from your phone.

Additional Considerations

• Loan Against Mutual Funds: Many asset management companies allow you to take a loan against your mutual fund investments.

• Mutual Fund Overlap: Ensure your portfolio doesn’t have too much overlap by investing in too many similar funds.

• Debt Mutual Funds: For conservative investors, these funds are ideal as they provide fixed income with minimal risk.

Conclusion

Investing in mutual funds is one of the most effective ways to build wealth and there are different types of Mutual Funds whether you want to invest in Tax Saving Mutual Funds also known as ELSS Mutual Funds, Debt Mutual Funds, which provide regular income or Equity Mutual Funds to enjoy high growth. Whenever selecting mutual funds ensure you go by your risk tolerance level and investment objectives and also employ tools such as Mutual Fund SIP Calculator, NAV Tracking and Performance Comparisons.

Disclaimer

The information provided in this blog is purely for general informational purposes only. While every effort has been made to ensure the accuracy, reliability and completeness of the content presented, we make no representations or warranties of any kind, express or implied, for the same. 

We expressly disclaim any and all liability for any loss, damage or injury arising from or in connection with the use of or reliance on this information. This includes, but is not limited to, any direct, indirect, incidental, consequential or punitive damage.

Further, we reserve the right to make changes to the content at any time without prior notice. For specific advice tailored to your situation, we request you to get in touch with us.