Nowadays, mutual funds have become one of the most famous investment methods. Although, the most arising question among the investors regarding this mode of investment is “What are the best mutual funds to invest?”. However, India’s top-performing mutual funds are assured to give a high return to investors. So, here you are going to read about the best mutual funds to invest in 2020. Also, you will know how to choose the best performing mutual funds.
Moving further, another interesting thing about high return mutual funds is it fulfills your short-term, long-term, tax-saving, or even emergency needs. So let’s start to find out the top-performing mutual funds to invest in 2020. Even, you also have the option to invest in the broad categories of mutual funds like debt funds, equity funds, liquid funds, and balanced funds. Moreover, you can also save up to Rs.1.5 lakh in a financial year.
What are the Mutual Funds?
A mutual fund is formed when an Asset Management Company (AMC) pools investments from several individual and institutional investors to buy securities. Further, AMCs have fund managers to control fund investments. In short, mutual funds club investments from various investors to invest their money in securities, stocks, and bonds. You can also click here to understand why mutual funds are considered long term investments.
Furthermore, mutual fund investors are issued units of the fund against the quantum of investment. Investors are also to re-invest or redeem fund units at the present Net Asset Value (NAV).
In addition, NAV is the market price of the fund. So, it varies regularly. It is necessary because it shows the value of each share of the fund. Just as shares have a share price, so too funds have a NAV to represent its worth. Besides this, mutual funds are controlled by the Securities and Exchange Board of India (SEBI). Therefore, they can be considered as a safe investment mode.
Main Categories of Mutual Funds
Moving further, there are three types of mutual funds in which one can invest, namely Equity funds, Debt funds, and Hybrid funds. So let’s discuss these types of high return mutual funds broadly. So one may able to understand which is the best plan suitable for him.
Equity Funds
Firstly, equity funds are one of the best performing mutual fund investment plans that invest only in stocks and other equity tools. Moreover, it spends 65% of its assets in shares. Also, it has a higher ROI by purchasing stocks in companies with varying market capitalization.
Debt Funds
Secondly, Debt funds also have some safe investment options such as Corporate bonds, Treasury bills, Government Securities as well as Commercial paper. Apart from these options, it also has other money market tools to invest under fixed-interest securities.
Hybrid Funds
Lastly, hybrid funds are investment funds defined by diversification of two or more groups of funds. Similarly, funds like these invest in a combination of stocks and bonds.
- Moreover, a hybrid fund is a category of the mutual fund or ETF (Exchange Traded Fund) that invests in various types of assets or asset classes to produce a diversified portfolio.
- Also, the common definition of a mixed fund is a mutual fund, which normally contains 60% securities and 40% bonds.
- For example, the best investment options are the combined funds, that combine growth and discount stocks.
Henceforth, this makes these funds suitable for beginners or core holdings in a portfolio for diversification.
Best Performing Mutual Funds to Invest in India for 2021
Now moving further, here are lists of the top 5 mutual funds of each category with all the necessary details. Also, this will help you in choosing the best mutual fund to invest in 2020. Moreover, you will find who can invest in these funds.
Top 5 Equity Funds
| Fund Name | AUM (Crores) | 3 Year Returns | 5 Year Returns |
|---|---|---|---|
| Mirae Asset Emerging Bluechip Fund | Rs. 8,839 | 0.83% | 10.34% |
| Axis Long Term Equity Fund | Rs. 19,632 | 4.13% | 6.54% |
| Mirae Asset Large Cap Fund | Rs. 15,347 | 0.34% | 6.24% |
| SBI Small Cap Fund | Rs. 3,280 | 0.96% | 8.57% |
| Axis Focused 25 Fund | RS. 9,493 | 3.03% | 8.41% |
Who Should Invest in Equity Funds?
- Investors with the best investment ideas as well as a high-risk appetite.
- Also, people who are looking for Long Term Investment Plans.
- Individuals who want tax-saving investments can also invest in Equity Linked Saving Schemes (ELSS).
Top 5 Debt Funds
| Fund Name | AUM (Cr.) | 3 Year Returns | 5 Year Returns |
|---|---|---|---|
| Nippon India Gilt Securities Fund | Rs. 1,250 | 10.17% | 9.52% |
| SBI Magnum Medium Duration Fund | Rs. 3,192 | 10.09% | 10.13% |
| Kotak Credit Risk Fund | Rs. 2,662 | 8.61% | 8.77% |
| ICICI Prudential Ultra Short Term Fund | Rs. 5,426 | 8.97% | 8.89% |
| Franklin India Liquid Fund | Rs. 3,582 | 7.30% | 7.88% |
Who Should Invest in Debt Funds?
- Risk-averse investors with an investment horizon of 3 to 4 years.
- Also, investors seeking the best options to invest money in highly liquid investments.
Top 5 Hybrid Funds
| Fund Name | AUM (Cr.) | 3 Year Returns | 5 Year Returns |
|---|---|---|---|
| DSP Equity & Bond Fund | Rs. 5,538 | 1.66% | 7.18% |
| Franklin Pension Fund | Rs. 410 | 3.82% | 6.27% |
| Kotak Debt Hybrid Fund | Rs. 236 | 5.44% | 8.15% |
| Aditya Birla Sun Life Arbitrage Fund | Rs. 3,254 | 6.65% | 6.72% |
| IDFC Dynamic Equity Fund | Rs. 866 | 4.70% | 5.34% |
Who Should Invest in Hybrid Funds?
- Conservative investors looking for low-risk investment avenues.
- Also, investors with long term investment plans.
How to choose the Top Performing Mutual Funds?
Although, an individual must eventually desire to invest in high-return mutual funds. Besides this, the complete selection can be guided by three factors which are an investor’s life goals, a deep understanding of investment risk, and investment horizon.
Investment Objective
Firstly, an investor should know his personal life goals, and correspond to the life goals an investment plan must be selected. As each policy is different from the other and has a different purpose. Therefore, to make a meaningful decision the mutual fund investment objective should match an investor’s goals, investment plan, and risk appetite. But, do remember, the objective for a long term investment cannot be met with a short term plan.
Furthermore, all the essential details related to the plan, its asset allocation, aim, and strategy is available in the key information document and scheme information document.
Fund History
Fund history is the tracking record of the fund’s performance in the past during the ups and downs of the market. Moreover, this will reveal the strength of the fund during difficult times. But, the latest launched fund may or may not highly perform in difficult times. For example, the bear runs in the market since it does not have dealt with these types of scenarios. On the other hand, high return mutual funds with a good history show the reliability of investment strategies.
In short, an investor must examine the track record for the same period for which the investment horizon is decided. For instance, if an investor wants to invest for 5 years he must check the fund history of 5 years.
The expense ratio is defined as an annual fee charged by the fund house manager for managing the fund of an investor. It is expressed as a percentage. Thus, the final payout to an investor will be the returns obtained minus the expense ratio. So, the net amount is the final amount that an investor received.
Expense Ratio
Further, the higher expense ratio results in lower returns for an investor. Therefore, while considering a fund, an investor must select a high return mutual fund with a lower expense ratio compared to peer funds in the category.
Performance of Fund Manager
The fund manager’s involvement is also important in the performance of a fund. Because the fund manager has to conduct the show smoothly. It is also necessary to know the track record of the fund manager. Even an investor should examine the performance of the fund during the market slump. Better fund management is seen when a high return mutual fund consists of losses during the bear runs of the market.
Assets Under Management (AUM) & Costs
AUM defines the size of the fund, the total number of assets the fund holds, and later invests in securities. So this shows the capability and potential of the fund due to which the investors are highly investing in that fund. However, high AUM can expose a fund to market risks.
Also, costs such as Expense Ratio and Exit Load must be taken into account. Because these charges are withdrawn directly from your returns. Moreover, the Expense Ratio is the cost charged for portfolio management. Exit Load is the cost charged during the redemption of fund units. But the expense ratio can be extremely high for some funds. According to SEBI, a maximum of 1.5% expense ratio is fine. Although, investors must avoid funds that have strict exit loads.
Avoid Brokerage Charges – Go for Direct Fund Options
Furthermore, there are two kinds of Fund Plans- Direct and Regular. In Direct Plans, the investors directly invest in desired funds without taking the help of brokers. While in Regular Plans, the investor has to reach out to a broker who then further proceeds the investment and transactions.
How to invest in Top Performing Mutual Fund?
Moving further, an investor should know how to invest before start investing. An investor can invest a lump sum one time or through SIP for a particular period. In a lump sum investment, you can deposit all your money at one time. While SIP allows the investors to deposit a particular amount in the mutual fund scheme at periodic intervals.
However, an investor can select any of these ways. If an investor has a significant corpus to invest for a longer-then then he can choose to invest a lump sum one time.
On the other hand, the investors who are investing for the first time in the mutual funds are recommended to invest monthly, quarterly, or half-yearly. This way of investing is also known as SIP.
You can also invest in high return mutual funds via offline as well as online mode.
Furthermore, to invest via offline mode, firstly visit your nearest branch office of the fund house and invest in the selected scheme. But you need documents such as Identity Proof, PAN Card, Cancelled Cheque, Address Proof, Passport size photographs, and KYC documents handy.
Here are some steps to invest in mutual funds via online mode:
- Firstly, select a plan to invest in mutual funds.
- After that, your investment account.
- Make a payment instantly or setup your investment for a later date.
- Now, money gets deducted from the bank and will transfer directly to mutual fund companies.
- Mutual fund companies assign you units and send confirmation through email & SMS.
Apart from this, you can also learn more about the short term and long term investment plans for a better investing experience. Besides this, Click here, to check the best investment plans available in India.
Frequently Asked Questions Regarding Best Mutual Funds to Invest 2021
SIP is a Systematic Investment Plan. It is an investment plan under which a particular amount is deposited in the mutual fund plan at periodic investments. Moreover, SIP helps an investor to get benefitted from the power of compounding. Also, it keeps the investment requirement light on the pocket. As it can be started with an amount of Rs. 500.
ETFs (Exchange Traded Funds) are the mutual funds that are listed and traded on the stock exchanges like shares. An ETF tracks Sensex or Nifty by carrying securities in the same weights as the Nifty/Sensex. Moreover, ETFs can be traded anytime in the stock market. But you require a Demat account to invest in an ETF and proceed with buying or selling transactions.
Mutual Fund Calculator provides you the investment value at maturity by calculating fund returns as per your investment horizon. Also, the investors can set the variables of the calculator. The variables can be SIP/lump sum, investment amount, frequency of SIP, SIP duration, and expected rate of return.
Editor’s Note | Best Mutual Funds to Invest
Due to the coronavirus, one of the sectors that have been hardest hit is mutual funds. Even, the returns have dropped whereas investors are pulling out their investments. Further, this leads to a liquidity crunch. Also, Fund classes other than debt funds have also been put at risk due to the slowdown in the economy. As most of the investors have withdrawn their money. This has left the rest of the investors with a bigger exposure to risky debts. Moreover, whenever there is a health crisis like this pandemic, it pays to be prepared financially to face any problem.
