Expert Picks: The Best Mutual Funds to Invest In Right Now
New Delhi : Mutual funds have been the preferred investment instruments, especially by those who wish to diversify their portfolio and do not have the expertise or time to manage individual investments. Due to benefits offered by mutual funds, the Asset Under Management (AUM) of India's mutual fund market has seen a sixfold increase over the last decade.
Thus, if you are looking for a mutual fund to invest in and want to know about current top picks to diversify your portfolio, here is our take on it.
Understanding Mutual Funds
A mutual fund is an investment instrument pooling money from investors sharing the same interests and goals and investing by professional fund managers into different sectors or assets. Some of the common types of mutual funds based on their investment type include:
● Equity Mutual Funds
● Debt Mutual Funds
● Hybrid Funds
● Solution Oriented Funds
● Index Funds
Criteria for Selecting Mutual Funds
● Risk tolerance and investment goals
To choose the right mutual fund for you, carry out your risk assessment to determine your tolerance based on your investment goals. Next, read the Scheme Information Document (SID) about the chosen fund and verify if it matches your tolerance level.
● Fund performance and track record
To determine the potential of a mutual fund’s growth, review its consistency by checking its 3 and 5-year returns record. Understand the sectors it predominantly invests in and attain information on the overall market outlook.
● Fees and expense ratios
This is one of the most essential aspects of choosing a mutual fund, as it determines the amount to be deducted from our investment amount.
Top Mutual Funds to Invest In
● Equity Funds
Equity Funds invest in stocks of different industries or companies of diverse sectors. They are ideal for inventors looking for higher returns over the long term. These funds are further classified based on their companies’ size (market capitalisation) and other aspects.
● Large-cap funds,
● Small-cap funds,
● ELSS mutual funds
● Multi cap funds
● Thematic funds
These vary in risk levels. For example, large-cap funds are less riskier and more stable. So, depending on your financial goals and risk tolerance, you can choose the top among your preferred category.
● Debt Funds
These are low-risk mutual funds as they invest in stable financial instruments such as government bonds, securities, money market instruments, etc. Common types of debt funds include,
● Liquid Mutual Funds
● Low Duration Funds
● Money market funds
Depending on your investment goals and risk profile, you can choose the best one for you. For example, liquid mutual funds are low-risk investments that are usually preferred for parking excess funds.
● Hybrid Funds
These funds combine equity and debt, with varying degrees of risk and allocation percentage. It is an ideal choice for moderate risk profiles. Common types of hybrid funds are
● Conservative Hybrid Funds
● Balanced Hybrid Funds
● Arbitrage Funds, etc.
It is essential to carry out your risk assessment, set investment goals and then select the right mutual fund for you.
Tips for Successful Mutual Fund Investment
● Review and adjust your portfolio regularly to ensure that your investments support your financial goals.
● Keep up with the latest market movements and trends to learn more about new strategies and potential investment opportunities.
● Consult with a financial advisor to optimise your investment strategy and make the best choice for you.
Investing in Mutual Funds is one of the most preferred investments as it gives diversification benefits without the stress of managing your portfolio yourself. With the help of professional fund managers, financial advisors, tools like the mutual fund sip calculator and investment strategies, you can select the top choice that aligns with your goals.
