When it comes to returns on investment, mutual funds are among the best in business. A lot of us also agree that investing in mutual funds is the best way ahead for goal based financial planning. However, not all mutual funds in India will help reach our goals. We often hear the question, how to choose a particular mutual fund. There are select funds across categories which beat the benchmark as well as category averages. Instead of looking around for best investment tips, these are the funds we should be focusing on. There are best dividend giving mutual funds, best MF’s in terms of returns and so on. Let us look into the best mutual funds in India that can be chosen for investment in 2014 based on returns.
There are 15 top performing funds that we have short listed for you. You should be looking to diversify across various sectors and categories. Ideally, portfolio diversification should be done using 5-6 types of mutual funds. For instance, a good diversified portfolio can consist of 2 large cap, 1 mid/small cap, 1 ELSS, 1 debt fund. Invest in balanced fund if you are not an expert in diversifying through separate equity and debt funds. If you are a conservative investor, invest in an index fund. If you have already chosen few top mutual funds, you can look to add some of the below funds to your existing portfolio. You can choose from the following funds.
(Also see: Mutual fund recommendations for 2013)
Top large cap funds
Large cap funds are considered relatively safe as they invest in stocks of large cap companies. These funds are also known as blue chip equity funds as they invest in stocks called blue chip stocks which have the largest market capitalization among all. They should form the core part of your portfolio. Following are the best 3 large cap equity mutual funds with their past 1, 3 and 5 year returns.
|Mirae Asset India Opportunities||58.34%||28.19%||18.18%|
|Icici Pru Focussed Bluechip||44.57%||23.65%||16.80%|
|Franklin India Bluechip||41.11%||19.83%||13.78%|
(Also see: Invest in mutual funds through demat account)
Top mid and small cap funds
These funds invest in mid and small cap stocks which have market capitalization lesser than large cap stocks. Some of these are upcoming companies which have great potential for the future. However, since such companies are still making their mark in the market, they are considered riskier for investment purpose. Mid/small cap funds have the ability to boost your portfolio or drastically make a dent on it based on market movements. It is better not to have greater exposure to funds. You should not have more than 1-2 funds from this category in any case.
|Religare Invesco Mid and Small Cap||81.05%||31.21%||25.56%|
|HDFC Midcap Opportunities||85.47%||34.14%||24.5%|
|ICICI Pru Discovery||81.73%||35.84%||23.17%|
Top ELSS funds
Equity linked saving scheme (ELSS) funds are popularly known as tax saving funds. They are unique as they provide dual benefits of returns as well as tax saving. They have lock-in of 3 years and invest in equities.
|ICICI Pru tax plan||59.54%||28.77%||18.55%|
|IDFC tax advantage||49.40%||26.64%||16.42%|
|Religare Invesco tax plan||60.96%||27.08%||17.93%|
Top balanced funds
This is a special category of funds which invests in equity as well as debt instruments. They are also known as balanced funds. Investors who are looking to balance their portfolio by investing in debt funds as well as equity funds can choose a single hybrid fund to get exposure to both. Some funds invest more into equity and some more into debt. The taxation of the fund depends on the % invested in equity or debt. Here are the top balanced mutual funds to invest in India for 2014.
|ICICI Pru balanced||48.56%||25.29%||17.89%|
Debt funds are those which invest in low risk securities of tenure ranging from 91 days-2 years. They invest in high quality commercial papers and treasury bills. Since they invest in government securities, default risk is almost not there. However, they face interest rate risk.
|Templeton India Ultra short bond||9.61%||9.52%||8.49%|
|Canara Robecco short term||9.89%||9.07%||8.08%|
|Pinebridge India short term||9.38%||8.69%||7.92%|
The above analysis is only to inform you of the best mutual funds in India across various categories of mutual funds. However, invest in any financial product only as per your financial situation. Carefully assess your risk, age, goals, etc while choosing mutual funds for investment. Also, make sure you review the performance of these funds every 6 months to 1 year.