What are mutual funds?
Mutual funds are the most popular form of investments in which you can invest in several investment tools at once such as bonds, shares, stocks, equities, securities, and other money market assets. If you decide to invest in mutual funds, it will be regulated by a professional manager on your behalf and you do not have to worry about anything. The manager will take care of where you should invest, how much return you would get, tax exemptions, etc. The risk of earning returns in mutual funds is less since you invest in more than one entity at once and it also broadens your portfolio.
How to choose the best mutual fund for investment?
Making investments in mutual funds is easy, provided you know how to opt for the best scheme. There are certain aspects that you should consider before deciding to invest in mutual funds. We have put together those aspects for you to make it easier for you to decide upon the schemes.
- Identify the objective- The first rule of investment is to ask yourself the objective of your investment. Gain an understanding of the time period you want to invest the amount for, be it long term or short term. You need to understand the financial goal or the purpose of your investment. For instance, you can invest for educational purposes that take up to five years, or post-retirement plans that can take more than 10 years, etc.
- Performance of funds- Try to find out the past performance of the fund. In this way, it becomes easier for you to judge the scheme. However, it does not mean that it will do good or bad in the future. The previous performance helps you determine the consistency of the fund.
- Risks- There is no doubt that there are risks associated with mutual funds. Having said that, you can actually determine the probability and risk tolerance of mutual funds. You can choose to invest in schemes that are not too risky such as large-cap equity funds in India or can invest regardless of the risk factor and earn higher returns such as mid-cap and small-cap equity funds in India.
- Professional management-
One of the best parts about investing in mutual funds is the managerial expertise that you get along with other benefits. Your funds will be managed by your manager, actively or passively depending upon the kind of the fund. You must understand how you want your investment to be managed before investing in any scheme. Your manager will do the research on your behalf, evaluate all the procedures, and analyse the different sectors, trends where you should be investing.
Best mutual funds of 2021
Mutual funds are growing rapidly in India and there is always some fluctuation in the market. Here is the list of best performing mutual funds in India-
- Canara Robeco Bluechip equity fund
- IDBI India Top 100 equity fund
- BNP Paribas large cap fund
- Axis Bluechip fund
- Kotak Bluechip fund
- SBI small-cap fund
- Mahindra Badhat Yojana
- Invesco India mid-cap fund
- Nippon India small-cap fund
If you want to start investing your money, this is a perfect time. You don't even have to do anything if you think you are not educated enough about the market. By investing in mutual funds, you will gain an understanding of the associated aspects through your manager. Just find out your financial goal and get started.