How To Select 10 Best Mutual Funds To Invest In India [2022]

Mutual funds

Financial vehicles such as mutual funds pool the money of various investors and invest them in several money market instruments, stocks, bonds and other securities.

Are you looking to invest in the best mutual funds in India for 2022?

If yes, then you might want to follow a proper guide that shortlists the top-performing schemes. Furthermore, you must know everything about mutual fund investment, including its types, taxation, and more. Read on to know the top 10 performing mutual funds in India.

Also Read: Small Cap vs. Mid Cap vs. Large Cap Funds

Which Are the Top Mutual Funds to Invest in India?

Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.

Types of Mutual Funds

Based on investment structure, mutual fund investments are of two types. Let’s check them out!

1. Close-Ended Funds

Close-ended funds have a fixed maturity date and enable investors to enter these schemes only during the initial period or New Fund Offer or NFO period. In case individuals wish to opt out of a close-ended fund before the lock-in period ends, they can sell their units on the stock exchange. 

2. Open-Ended Funds

Open-ended funds come without a specified lock-in period allowing investors to withdraw, sell or redeem units any time they prefer. 

3. Interval Funds

Interval mutual funds have characteristics of both open-ended and closed-ended funds. As per the discretion of the fund house, they can be purchased or redeemed only at certain intervals. 

Further, the top mutual fund investment can be classified into three types based on the asset class they invest in. 

1.  Equity Schemes

Equity funds essentially invest in equity and equity-related securities. The performance of these funds is impacted by price fluctuations in the stock market. Accordingly, they carry high financial risk. That said, these funds have the potential to generate higher returns than other types of mutual fund schemes.

2. Debt Schemes

This type of mutual fund invests in fixed income instruments such as bonds, debentures, treasury bills and other debt securities. Such funds are suitable for someone who is risk-averse and is looking to earn stable returns.

3. Hybrid Schemes

As the name suggests, hybrid fund invests in both equity and debt instruments. The proportion of investment in each asset class depends on the objectives that a hybrid fund has been set up to achieve. 

How to Select Top-Performing Mutual Funds?

Choosing the right mutual fund looks easy, but it cannot be done without sticking to some basic criteria. Let’s look at some criteria to be looked into while making a mutual fund selection.

• Objective of the investment : Having a clear objective can help investors determine if investing in a particular scheme would help them meet their investment objective. As for the style, one can choose from largecap, midcap, smallcap or microcap, multicap and flexicap funds depending on one’s risk undertaking.

• Strategy of the investment: An investment strategy determines the approach that a fund house proposes while making investment decisions. As an investor, one should also consider the investment strategy of the fund. It also helps in the success of your investment portfolio. 

• Expense ratio: Be it direct fund or regular fund, the cost to manage the fund always exists. This indicates the cost of investing in an equity fund and later on are adjusted in your profits. The higher the expense ratio , the more it affects the fund performance. 

• Ratio and performance analysis: One needs to compare the risk and performance of a fund by finding out the average returns. One also needs to analyse the fund’s average return and the risk exposure associated with it.

• Entry & exit loads:  Entry & exit loads are the cost components that impact an investor directly. Entry load is a fee charged by a fund house from an investor when they start investing in the fund. Exit load refers to the fee charged by the fund house upon exiting the scheme. As an investor, one must look out for mutual fund schemes that have zero or minimal entry and exit load. 

Advantages of investing in best mutual funds

Before choosing the top mutual funds in India, check out some of its benefits of investing in mutual funds:

• Mutual Funds are managed by professional fund managers with specialised financial knowledge and skill sets.
• Mutual funds allow you to diversify into many different stocks easily and in a cost-effective manner.
• It is easy to buy and redeem units in mutual funds.
• You can choose from a wide variety of mutual funds to invest such as Systematic Investment Plans (SIPs), Systematic Withdrawal Plans (SWPs) and Systematic Transfer Plans (STPs).
• Mutual funds offer a highly transparent and cost-effective option to invest your money.
• As its policymaker, SEBI regulates the mutual fund industry and lays guidelines to safeguard your interest as an investor.
• Mutual funds offer diversification or access to a wider variety of investments than an individual investor could afford to buy.
• Monthly contributions help the investor’s assets grow.
• The risk of investing in mutual funds is much less than that of individual stocks. 

When Should You Invest In Mutual Funds? 

Ideally, you might want to consider investing in mutual funds the moment you start earning and saving. To that end, there is no minimum age when you can start investing. 

As there are a number of schemes available in the market, one might want to figure out their purpose of investing before entering into any scheme. For instance, if you are someone who prefers growth over a long period by investing, you might want to consider investing early.

Things To Consider before Investing In The Best Mutual Funds In India 

1. Risks and Returns

Two things you might want to focus on before investing in mutual funds are your financial goal and risk-taking capacity. Based on these two factors, you can analyse the risk-return profile of each type of mutual fund investment, and select the one that is ideal for you. 

2. Growth and Dividend

While investing in mutual funds, you will come across growth and dividend options. In the case of the former, your dividend amount will be reinvested and help you in capital growth. On the other hand, a dividend option will allow you to receive payment in the form of dividends. Nevertheless, remember that mutual fund schemes do not give any guarantee in relation to the amount and frequency of such dividend payments.

3. Direct and Regular Plans

Direct mutual fund investment plan enables you to invest directly through an Asset Management Company (AMC). Nevertheless, by opting for a regular plan, you invest through a financial intermediary (broker/distributor). 

4. Lump Sum and SIP

When allocating funds to a mutual fund scheme, you might want to choose a particular investment mode. You may choose to invest the entire amount available with you via the lump sum option. Alternatively, you can invest small amounts at fixed intervals through a Systematic Investment Plan (SIP). 

Another essential factor that you must consider when investing in mutual funds is the expense ratio. It refers to the annual fee that asset management companies charge on a yearly basis to cover the costs of running a fund. Such costs include administrative expenses, distribution fees and more. 

By choosing funds such as choosing the Navi Nifty 50 Index Fund, investors can allocate their funds to shares of top Indian companies by paying an expense ratio of 0.06% only.  

Based on your financial goals, you can also consider investing in any of the various other mutual fund investment schemes offered by Navi Mutual Fund. 

Taxation Of Mutual Funds 

Here is a table summarising the taxation of debt and equity funds:

Further, investments in Equity Linked Savings Schemes (ELSS) are eligible for tax deduction from your income under Section 80C of the Income Tax Act. The maximum amount eligible for tax deduction is Rs.1.5 lakh. 

Also Read: 80C Tax Saving Mutual Funds

Final Word

Now that you know in detail about mutual fund investments, their types, taxation and more, choosing the best mutual funds from the aforementioned list might get easier for you. In this regard, you can consider AMCs such as Navi Mutual Fund and select any of their mutual fund schemes to fulfill your investment objective. 

FAQs on Best Mutual Funds

Before you go…

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Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.

This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.