Best Mutual Funds for Beginners
03 Sep 2019, India : Mutual funds are sophisticated products, and for beginners getting anxious is pretty common. However, if you are clear about your investment objectives, it becomes easy to start your investment journey. Assuming that you want to do it yourself, it’s wise to prepare for a long-term strategy and have comprehensive knowledge about mutual funds.
Which mutual fund is best for beginners?
Most first-time investors have this query before they start investing in mutual funds. At times these investors couldn’t figure out which is the best mutual fund for them and keep postponing their mutual fund investment plans for like forever. There’s a huge variety of mutual funds which makes investing confusing for beginners. Checkout the Finity app if you need expert help to invest in mutual funds.
This article covers,
- Types of mutual funds
- Top AMCs (Asset Management Companies) in India
Based on your investment objective, you can choose the best mutual fund for you.
Types of Mutual Funds
- Asset Class-Based Mutual Funds
- Equity Funds
- Also called stock funds as they invest in stocks.
- Aim to grow money faster, thus involves higher risk.
- Debt Funds
- Best for passive investors with a low-risk appetite who wants a small but regular source of income.
- Money Market Funds
- Safer investment
- Offer lower potential returns than other types of mutual funds.
- Hybrid or Balanced Funds
- They invest in both equities and fixed-income
- Suitable for investors with a high-risk appetite.
- Structure-Based Mutual Funds
- Open-Ended Funds
- Investors can buy/sell funds and exit at the current NAV (Net Asset Value) anytime.
- Top-performing mutual funds in India since these funds impose no restriction.
- Closed-Ended Funds
- Come with fixed unit capital to invest.
- Investors can’t opt for more than the pre-agreed units.
- Interval Funds
- Have traits of both open-ended and closed-ended funds.
- Funds can be bought or exited during particular intervals only selected by the fund house.
- Goal-Based Mutual Funds
- Growth Funds
- Invest a considerable part of the investment in shares and growth sectors.
- Best for investors with a high-risk appetite.
- Income Funds
- Member of debt mutual funds family.
- Professional fund managers manage income funds.
- Offer better returns as compared to the deposits.
- Liquid Funds
- Falls in the category of debt funds.
- Liquid funds invest in debt and money market instruments with a maturity period of less than 91 days.
- Tax-Saving Funds
- Also called Equity Linked Savings Scheme (ELSS)
- Invest in equity & equity-related securities.
- Facilitate wealth generation and tax-saving.
- Lowest lock-in period
- One of the top-performing mutual funds for salaried investors in India with long-term investment goals.
- Aggressive Growth Funds
- Offer abrupt profits, thus are susceptible to market performance.
- Suitable for investors with a high-risk appetite.
- Capital Protection Funds
- Protect the principal simultaneously earning smaller returns up to 12%.
- Invest money in CDs, bonds, and the remaining in equities.
- Fixed Maturity Funds
- Come with a fixed maturity period varying from 1 month – 5 years.
- Invest money in an investment option having the same term, to earn accrual interest by the time FMP matures.
- Pension Funds
- Invest a part of investor’s income in a preferred Pension Fund to accumulate over some time.
- Best for investors looking forward to securing their retirement.
- Risk-Based Mutual Funds
- Very Low-Risk Funds
- Range from 1 month -1 year and are the least risky funds.
- Offer low returns up to 6%.
- Best for investors who are looking to accomplish their short-term financial goals.
- Low-Risk Funds
- Offer up to 8% return and the flexibility to switch when valuations offer stability.
- Best for investors those who invest at the time of unexpected crisis (national) or rupee depreciation.
- Medium-Risk Funds
- Invest a part of investment money in debt funds and the remaining money in equity funds.
- The NAV is not that turbulent, and the average returns can be up to 12%.
- Best for investors having a moderate risk appetite.
- High-risk Funds
- Highly prone to market volatility.
- Offer up to 30% returns.
- Best for investors with a high-risk appetite.
Top AMCs (Asset Management Companies) in India
An Asset Management Company is an organization that pools funds from the investors and invests it into different available investment options such as equities, debt, real estate, gold etc.
Below is the list of top Asset Management Companies in India.
- SBI Mutual Fund
- HDFC Mutual Fund
- Reliance Mutual Fund
- Axis Mutual Fund
- L&T Mutual Fund
- Aditya Birla Sunlife Mutual Fund
- UTI Mutual Fund
- ICICI Prudential Mutual Fund
- Tata Mutual Fund
- Sundaram Mutual Fund
Winding-up
I hope that you have acquired a pretty good understanding about various types of mutual funds. Now when investing in mutual funds in India, using this knowledge you will be able to choose the optimal solution for your investment needs with minimum risk associated.
