Best Mutual Funds of 2019

best mutual funds

Mutual funds have become a very popular avenue for investment for many investors because of the benefits that they have. They allow investors market-linked returns, diversified risks through asset allocation, affordability through SIPs and ease of liquidity. Given these benefits and the potential of attractive returns, investors choose to invest their disposable savings in mutual funds.

 

Mutual funds come in many different variants and when it comes to choosing the best fund, investors are often confused. With so many options available, who can blame them! However, when investing in a mutual fund scheme, the risk profile and suitability should be judged so that the fund performs as per your expectations. Mutual funds are designed in different types so that they can fulfill the investment needs of different investors and so, choosing the best mutual fund should be done after careful consideration.

 

Here are some of the most popular types of mutual fund schemes and an analysis of which scheme suits which type of investor –

 

Types of mutual fund schemes

 

  • Equity mutual funds

These are, perhaps, the most popular scheme of mutual funds which invest in the equity market. At least 65% of the scheme’s portfolio is invested in equity and equity oriented securities. Equity mutual funds carry very high investment risks because the equity market is volatile. If the market rises, the returns are good and if the market falls drastically, investors might also lose money. On the other hand, equity funds promise very good returns.

 

  • Equity Linked Savings Scheme (ELSS)

ELSS is a type of equity mutual funds only but it is listed independently because of the distinct tax advantages the fund has. Investments in the ELSS funds are allowed as a tax-free deduction under Section 80C up to a maximum of INR 1.5 lakhs. Moreover, ELSS investments also have a lock-in period of 3 years. Investments done in ELSS schemes cannot be redeemed before the completion of 3 years. Risk is high because it is an equity scheme and so are the returns.

 

  • Debt funds

While on one end of the spectrum lie equity funds on the other end lie debt funds. Debt funds invest at least 65% of their assets into fixed income earning instruments. Since the portfolio is invested in fixed income instruments, debt funds have very low risks and the returns are also low. Debt funds are also not affected by market volatility and provide good returns, compared to equity, in a falling market.

 

  • Balance funds

Balanced funds combine equity and debt investments. About 60% to 65% of the fund is invested in equity and the remaining in debt. Alternatively, in debt-oriented balanced funds, 65% is invested in debt and the remaining in equity. Balanced funds provide moderate returns and the investment risk is also moderate as equity and debt balance each other out.

 

  • Liquid funds

Liquid mutual funds are a type of debt funds which promise instant liquidity. These funds are suitable for parking surplus cash. Returns are low but higher than those promised by a bank savings account.

 

Suitability of different funds to different types of investors

 

Types of mutual funds

Characteristics

Suitable for

Equity mutual funds High risk, high return Risk-loving investors who don’t mind taking risks and those who are looking for high returns. Equity funds  make sense for young investors who have longer investment horizons and can afford to take risks
ELSS High risk, high return, tax saving Risk-loving investors who are looking to save tax
Debt mutual funds Low risk, low returns Risk-averse investors who don’t want to lose their invested capital and who don’t mind lower returns. Debt funds are also suitable if the stock market is highly volatile and is falling
Balanced mutual funds Medium risk, medium returns Moderate investors who like taking limited risks and expect moderate returns
Liquid funds Low risk, low returns, easily liquid Investors having a short-term investment horizon. The fund is suitable for those who are looking to park their surplus funds for a short period of time

 

So, understand the variants of mutual fund schemes and the suitability of each variant to different investment needs. When you choose a mutual fund investment based on its suitability to your investment goals, you can choose the best mutual funds of the year.

 

Recent articles
follow us and stay updated
[mc4wp_form id="2743"]
About TurtlemintPro
TurtlemintPro is the best insurance advisor app if you are looking to start, grow or manage your insurance business. With TurtlemintPro, you can become a trusted insurance advisor to your customers and provide great service as well. You can provide quotes from multiple insurers for multiple products, issue policy instantly without lengthy paperwork, follow-up with leads and much more.
Become a partner Become a partner