Dec 10, 2018 5 min read

Top 4 Types of Mutual Funds to Invest in Now

Read this blog to find out the best category to include in your portfolio now.

The mutual fund is an investment avenue which is not just known for offering kicker returns but also for keeping your money safe. There are a few of the mutual fund categories that fit best in most of the portfolios and the reason being that they are adept at fulfilling the basic needs of the investor. The recent consolidation of schemes mandated by SEBI, the market regular and the prescription of exposure that each category can take in different asset classes has made it easier for the investors to asses the risk and returns from the schemes and chose the one that best suits their needs.

Making the most use of the recent amendments, we have broadly classified four categories of mutual funds that almost every investor should add to their portfolio now.


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Equity As Starters

To provide momentum to growth, most of the investment portfolios of mutual funds look for equity as starters. They are a necessary aspect as they help in accruing long-term capital and warding off the effect of inflation with time. Investing in equity directly can be an option; however there are several constraints associated with it that make it riskier, and therefore mutual funds seem to be a preferable choice.

If you are someone who is seeking relative stability along with steady long-term growth, then it will be wiser to consider large-cap funds. They invest at least 80% assets in the large-cap segment which is made up of large companies who produce stable revenue streams, profitability, growth and has the ability to ride through different market cycles. These aspects make large-cap category the least risky asset class of the equity market.

Read more:
Best Large Cap Mutual Fund 2018
Best Small Cap Mutual Funds to Get the Best Returns
5 Top Mid Cap to Invest in 2018

A Dose of Multi-Cap

Being an investor who is ready to take some risk in the hope of better returns, multi-cap funds can be a good option to invest in. These funds allow the fund manager to move across the market caps, i.e., between large, mid, and small-cap stocks based on their view of the relative performance of these diverse segments and invest in opportunities without having any constraint of the market cap. These schemes can diversify one’s investment across segments, and therefore can give better risk-adjusted returns. There can be significant differences in the way portfolios of schemes are structured and managed, and thus, a wide range of return and risk profiles are available.

Read more: Top 3 Multi Cap Funds

A Flavour of ELSS for Tax Saving

If you are looking for one class of mutual funds which score well on performance, transparency, and flexibility, then Equity Linked Savings Schemes should be your pick. Including them to the portfolio is a must especially if your salary falls under any tax slab level. Such schemes come with a lock-in of three years which impose the discipline of staying invested. The portfolios of ELSS schemes are all diversified across the market caps and sectors and the lock-in period provides the fund managers with the leeway to explore strong opportunities without having the pressure of redemption. The category gave around 9% return in the preceding 3-years period and 15.75% over five years.

Also read: Invest in these 5 ELSS Best Funds

A Pinch of Debt Funds

To maintain regular cash flow, debt funds with Macaulay period of less than a year are a must for the portfolio. They are required to meet the financial need for a safe product to hold funds with the benefit of liquidity and offer ease of making transactions to the investor. Such funds include liquid, overnight funds, ultra-short duration, low duration, and short-duration funds. They differ by the maturity profile that the portfolio can hold which in turn determines volatility from the mark-to-market element in the scheme’s portfolio.

Also read: Best Debt Funds to Invest in Now

Invest in the Best Mutual Funds
  • 100% Paperless
  • No Transaction Charges
  • Easy to Invest
  • Safe & Secure

The Ending Note

Being a mutual fund investor, you must adhere to the fact that these investment avenues are market-linked, and thus investment should be made according to one’s financial goals including both equity and debt part. Also, it is important that finalizing a portfolio with too many types of mutual funds is also a bad idea. Although diversification is a vital part to mitigate risk in mutual fund investment after a certain point over diversification leads to low returns. To avoid such a case, regular monitoring and rebalancing become crucial.

To build a perfect portfolio, a suitable asset allocation that is derived from one’s risk appetite and investment horizon is needed. And for that, clarity of goals and realism around one’s cash flows is required. As an investor, you have to be clear about what you want to achieve, how much fund is needed for its completion, and when you would require this. The perfect way of investment over a long term is continuous asset allocation focused on goal-based portfolio creation. Each goal should be precise and defined in quantitative terms and duration. You can even ask any query concerning the regular plans of mutual funds by filling in the form mentioned below:

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