Every individual who wants to create wealth and also earn good income looks for best mutual funds, which are a good balance of equity and debt. Mutual funds with some good consistent performance in past and also at present have earned a good name in the market as a safe mode of investment with high returns.
This article will quantify the best mutual funds for 2013, which are performing well at present based on past performance. The mutual funds have been categorized as per their nature and the best funds in that category has been also mentioned.
While selecting funds, out of many factors few have been kept in mind, like past performance of funds, objective of fund, AUM, expense ratio, age of the fund, consistent return, standard deviation, Beta, portfolio of fund, AMC reputation etc.
Equity Mutual Funds
‘Greater the risk, greater the rewards’, this quote is most apt to this category of mutual funds as equity being the most rewarding if favorable and most risky due to its unpredictable nature. Investment in equity mutual funds is only suitable for long term and short term investment should always be avoided.
To create wealth either for yourself, or for your child’s education or marriage or your own retirement planning, invest in these funds for a longer duration and forget for a minimum period of 5 years. You can invest lump-sum and/or invest via SIP mode also. Don’t see NAV on daily basis and don’t stop your investment if market is down. These schemes invest around 80%- 100% in stock market.
• HDFC Top 200
• HDFC Equity Fund
• HDFC Mid-Cap Fund
• IDFC Premier Equity Fund
• Reliance Regular Savings Fund- Equity
Balanced Fund
If earning a safe income and normal return is your objective and you do not want to go for long term investment then these funds are best suited. If time horizon planned is less than 3-5 years, you can invest in Balanced Funds as they invest in ratio: 60% in equity & balance 40% in debt.
• Reliance Regular Savings Fund-Balanced
• HDFC Prudence Fund
• HDFC Balance Fund
Thematic Funds
These funds invest in one specific sector rather than diversifying the portfolio. Such funds carries most risks. Invest only 10% to 15% of your portfolio in such funds.
• SBI FMCG Fund
• Reliance banking Fund
• Reliance Pharma Fund
Monthly Income Plan (MIP)
They offer monthly income in the form of dividend. Similar to Post Office Monthly Income Scheme, these also work on similar manner. But there is a glitch, it is not mandatory that company will give dividend every month. Since about 20% of money will be invested in equity, it’s possible that company fails to give dividend in case stock market is down in similar fashion like in 2008. If regular monthly income without any break, is your aim then better avoid these mutual funds & go for Post office MIS or Bank FDs with monthly interest payout. Still in long term, these plans can give better returns than post office MIS.
• Birla Sun Life MIP II- Savings 5 Plan
• HDFC MIP Long term Growth
• Reliance MIP
Equity Linked Savings Scheme (ELSS)
ELSS invests up to 100% in equity like equity diversified fund. The only difference is that it has a lock-in period of 3 years. So, you get tax-advantage of Sec. 80C by investing in these schemes as per the current tax rules.
Government has gone step ahead and launched an additional section 80CCG and giving deduction for investing in equity shares of Government Companies. An article regarding this section is already posted with name “Rajiv Gandhi Equity Savings Scheme”.
Funds under this scheme are:
• HDFC Long Term Advantage Fund
• Franklin India Tax Shield
• Reliance Tax Saver
Gold Funds
The nature of investment only in gold also makes this mutual fund as thematic, but it differs in sense that it invests in a commodity rather than a specific sector. Funds are invested in Gold and offer guaranteed return in long term.
• Reliance Gold ETF
• SBI MF Gold ETF
• HDFC Gold Fund
All of the above mentioned funds offer various options like Growth, Dividend-reinvest, dividend payout etc. If you’re a long-term investor and your objective is to create wealth for yourself or for child’s education or marriage or simply for retirement purpose, just go with Growth option.
Systematic Investment Plan (SIP) shall be the preferred investment mode in Mutual Funds except for Monthly Investment Plans (MIP). Lump sum investment shall be avoided for being on safer side of the risk associated with equity.
