BEST MUTUAL FUNDS TO INVEST IN 2020
At MobiKwik, we apply big-data science and analysis to come up with a short list of funds that can help you narrow down your investment choices from the hundreds of mutual funds available. We receive no commissions or kick-backs from Mutual Fund Companies for our recommendations — so you can be sure that our advice is honest — and in your best interest.
EQUITY
LARGE CAP:
They invest primarily in equity and equity related instruments of Top 100 companies of Indian market with market cap of over Rs. 20,000 Crores. These should form core investment holdings of moderate risk investors looking for high returns over a period of 3-4 years.
LARGE AND MID CAP:
They invest primarily in equity and equity related instruments of Top 250 companies of Indian market diversifying their investments between large and mid-cap companies. These funds are suitable for moderate risk investors looking for high returns over a period of 3-4 years.
Mid Cap
They invest in stocks of companies ranked between 100 to 250 by size with market cap between Rs. 500 -10,000 crores. The market cap of the stock impacts the returns and risk of the fund. It is ideal for an investor looking for high returns along with high risk of losses.
Small Cap
They invest in companies with market capitalization of less than Rs. 500 crores of the Indian market, which includes all stocks except largest 250 by their size. They are more volatile, but can often help boost overall returns of the portfolio. These are suitable for aggressive risk investors with ability to take on higher risk of losses for higher returns.
Multi Cap
They invest in stocks of companies across large cap, mid cap, and small cap with a goal to maximize profits with lower market risks.
Tax Saving Equity Funds (ELSS)
In order to reduce your tax bill, you can invest up to Rs. 1,50,000 a year in Tax Saving (ELSS) funds under section 80C of the Income-tax Act.
Value Fund:
They invest in underperforming stocks, with the assumption that they may be undervalued due to temporary market factors and promise high growth once valuation is at par.
Focused Fund:
They invest in equity and equity related instruments but restrict the number of stocks in the portfolio to a between 25 to 30 compared to others category of funds holdings stocks of over 100 companies.
DEBT
They invest in bonds and money market instruments. It is ideal for low risk investors looking for alternative to bank deposits.
HYBRID
Aggressive Hybrid Fund
They invest in both stocks and bonds. It aims to seek long-term capital appreciation through 65-80% of total investments in equity and equity related instruments and also to generate current income by investing the remaining portion in debt and money-market instruments
Conservative Hybrid Fund
They invest in both stocks and bonds. It aims to provide monthly income through 75-90% investments in debt and money market instruments and also to generate long-term capital appreciation by investing the remaining portion in equity and equity-related instruments.
OTHERS
FOF- Global
They invest in other mutual funds to take exposure in international market. This allows investors to potentially yield higher returns through the best-performing foreign equities or stocks.
Index Funds/ ETFs
They invest in same stocks in same proportaion as that of the underlying index without changing the portfolio composition. These are passively managed funds, attempting to replicate the performance of a given index of stocks.
*Returns and rating as on July 03, 2020
What are Mutual Funds?
Mutual Funds are investment vehicles created by collecting money from several investors, and then using these funds to invest in securities such as stocks, debts, bonds, and other monetary instruments and assets. They are managed by the professional asset managers who have deep skills and perspectives on the functioning of the investment markets.
Once you invest in a Mutual Fund, you don’t have to bother with monitoring the market constantly, or deciding where to invest into. Each Mutual Fund has its prospectus, which states the investment target of the fund — and that’s what the fund managers aim at achieving.
The value of a Mutual Fund is denoted by its Net Asset Value, i.e. the average of the total value of all the securities held by the fund. But NAV of a fund is calculated on a daily basis so may not be the best measure for gauging the performance of a fund, instead one should study the returns on the investment given over a year or a longer period in which the fund has been active.
Benefits of Investing in Mutual Funds
For old investors and those who are starting out, mutual funds are a wonderful and convenient way to invest your money. Simply put, a mutual fund is a collection of stocks (equities) and/or bonds (debt).Here’s are 7 benefits of investing in mutual funds:
- Diversification: When you buy a Mutual Fund, you buy a collection of what that Mutual Fund has invested. Diversification means the Mutual Fund has spread out your money over different companies and/or different types of assets. Your money is invested in a mixture of products with high and low risk to both helps it grow and also protects it.
- Low Minimum Investment: You can get started with investing in most Mutual Funds with as little as Rs 100.
- Professional Management: Mutual fund managers and analysts wake up each morning with one goal – to research, analyze and study current and potential holdings for their mutual fund. And your investment advisor studies and evaluates mutual fund managers to pick the best funds to help you meet your goals.
- Systematic Investment Plans (SIPs): SIPs make it simple to invest regularly in a mutual fund with as little as Rs 100 a month. Once you register your bank mandate with an online platform, just set up a SIP with any amount you are comfortable with on any date of the month in a Mutual Fund of your choice. The money is automatically debited a day or two before that day every month and invested in that scheme so your investment habit gets regularized.
- Transparency: The investments that a Mutual Fund makes are publicly available every month, so if needed, you can see what your fund manager is doing.
- Liquidity: Because your money is spread across so many stocks and bonds, you can sell your mutual funds at any time to meet your financial needs. The money hits your bank account within 2 working days. There are Mutual Funds that do this even faster called Instant Redemption Funds. Your money comes back into your bank account within 60 seconds of selling an Instant Redemption Fund.
This post has been reviewed by Kunal Bajaj.
Kunal Bajaj is the Business Head, Wealth and Head of Corporate Development at MobiKwik.
Kunal has 18 years of experience in Institutional Equity Sales & Risk Management at some of the world's largest financial institutions like Credit Suisse, J.P. Morgan, CLSA and Goldman Sachs Japan. His last role was Managing Director and Head of Equity Sales at Jefferies India before he took the entrepreneurial route to set up Clearfunds in 2016. He is also a rank-holding Chartered Accountant.
He has appeared on various publications as a guest author including Moneycontrol, Business Standard , Live Mint and Business Today.He can be reached on LinkedIn and Twitter.