Mutual Funds are investment vehicles created by money collected from investors and utilising that to invest in securities, stocks and assets. They are managed by professional managers who have the skills to ensure the proper functioning of investment markets.
The mutual fund value is determined by the Net Asset Value calculated based on the average of the total value of the securities held by the fund.
Benefits of Investing in Equity Mutual Funds
A mutual fund is a collection of equities and/or debt. Some of the benefits of investing in equity mutual funds are:
- Diversification: Mutual fund investments have spread over different companies and assets. It invests in a mixture of products of both high as well as low risk thereby, letting it grow.
- Low Minimum Investment: One can start investing with as little as Rs. 100.
- Transparency: The investments made are available every month. So, if required one can see what his or her fund manager is doing.
- Liquidity: As the money is invested in various stocks and bonds, one can withdraw the money anytime to meet financial needs. The money gets deposited in the bank account within two days and if one chooses Instant Redemption Fund, he or she can get the money back within a minute by selling off the fund.
Best Equity Mutual Funds
According to SEBI, if a fund invests 65% or more in equities, it classifies as an equity-oriented mutual fund. Best mutual funds tend to offer high returns on medium to long term investments. Since they heavily invest in stocks, they are considered risky. There may be frequent fluctuations.
Equity Linked Savings Scheme is the best option under 80C under Income Tax Act. It offers higher returns over a short lock-in period of three years.
You can go through the article to know about the best mutual funds. Some of these are:
Mirae Asset Emerging Bluechip Fund – Growth Large & Mid Cap Fund:
It is an open-ended equity fund for investing in both large and mid-cap stocks. It invests 35-65% in large-cap companies and 35-65% in mid-cap companies. The fund gives investors the opportunity to invest in emerging companies which has the potential to become bluechip companies of the future. The investment approach aims at participating in high-quality businesses.
| Type | Large and mid-cap fund |
| Benchmark Index | Nifty Large Midcap 250 (TRI) |
| Plans Available | Regular and Direct |
| Expense Ratio | Regular – 1.99%Direct – 0.79% |
| Options Available | Growth and Dividend |
| Ideal Investment Horizon | 3+ years |
| Suitable Investment Area | Wealth Creation |
HDFC Small Cap Fund – Growth Small Cap Fund:
It is an open-ended equity scheme for investing in small-cap companies. The scheme shall predominantly follow a small-cap strategy with minimum exposure to 65% stocks. The aim is to invest in small-cap companies which have reasonable growth prospects and sustainable business models.
| Type | Small-cap |
| Benchmark Index | NIFTY Smallcap 100 (Total Returns Index) |
| Risk | Moderately High |
| Ideal Investment Period | 3+ years |
| Suitable Investment Area | Wealth Creation |
Axis Midcap Fund – Growth Mid Cap Fund:
It is an open-ended equity scheme for investing in mid-cap companies. The scheme shall follow the mid-cap strategy with minimum exposure to 35% of stocks. The aim is to invest in medium-sized companies which has strong growth potential.
| Type | Mid Cap |
| Benchmark Index | S&P BSE Mid Cap TRI |
| Plans Available | Regular and Direct |
| Expense Ratio | 1.99% |
| Options Available | Growth and Dividend |
| Risk | Moderately High |
| Ideal Investment Period | 3-4 years |
| Suitable Investment Area | Long term Wealth Generation |
DSP Natural Resources and New Energy Fund – Regular Plan – Growth Sectoral/Thematic:
It is an open-ended equity scheme operating in thematic energy resources. The aim is to invest in this resource which has a future growth opportunity. This scheme is applicable for those who wish to get higher returns compared to other equity funds.
| Type | Equity: Thematic Energy |
| Benchmark Index | MSCI World Energy 10/40 Net Total Return (35), S&P BSE Oil & Gas TRI (35), S&P BSE Metal TRI (30) |
| Plans Available | Regular and Direct |
| Expense Ratio | 2.48% |
| Options Available | Growth and Dividend |
| Risk | High |
| Ideal Investment Period | 1-5 years |
| Suitable Investment Area | Real Estate markets |
While evaluating the best mutual funds, one must be careful of the four factors which are fund returns, fund history, expense ratio and financial ratio. Fund returns help in determining returns for a period of five to seven years. Fund history should be ideally five years as by that time it would have seen the ups and downs of the market. Expense ratio is the annual expense in funds expressed in terms of percentage of the average net asset while financial ratios or risk factor ratios help in choosing the best mutual funds considering the risk factors involved.
