What are the top Mutual Funds in India for Investing?

You can diversify your investments in a variety of assets such as stocks, bonds, real estate, gold, etc through mutual funds in India. 

Mutual funds are categorized based on the asset they majorly invest in. For example, equity mutual funds invest majorly in stocks, whereas debt funds invest in bonds, similarly REITS funds invest in real estate and gold funds in gold.

Among all the different types of mutual funds in India, the ones that majorly invest in stocks and bonds are two most popular types of mutual funds. Hence, we can broadly say that equity and debt mutual funds are the top mutual funds in India for investing.

To narrow down on the selection of top mutual funds, you must first decide on your purpose of investment, risk appetite and time period for investment. 

  • Purpose of Investment – 

The variety of assets that you can invest in through mutual funds has different risk to reward ratios and helps in achieving different financial goals such as tax savings, long-term wealth creation, periodic income post retirement, creating emergency funds for short term liquidity, etc.

  • Risk appetite –

Risk appetite of an individual is determined by capability to take risk and willingness to take risk.

  • Time Period for Investment –

While you invest in goals the time period is determined as to when the goal would mature, this becomes the time period for investments

Individuals who invest randomly in different assets without a financial goal often make losses on their investments as they lose patience when the investments are volatile. Hence, knowing the purpose of investment, risk appetite and time period of investment is a crucial step before investing in mutual funds. 

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Determining top mutual funds in India for investing:

Most financial experts recommend that if you are looking to invest in assets that are less risky and offer fixed or regular returns, the debt mutual funds would be best for you. On the other hand, if you are looking to invest in assets that are high risk but have the potential to give higher returns, equity mutual funds may suit you.

Although, the risk of losing capital is present in both debt as well as equity mutual funds. The equity mutual funds are considered to have a comparatively higher risk due to the volatility in stock market. However, if we study macroeconomics, one can easily see that equity mutual funds are the top mutual funds in India for investing. 

Below are few macroeconomic factors that show why equity mutual funds are the top mutual funds in India for investments:

  1. Economic growth in the country due to factors like cheap labour, favourable Government policy, easy credit, large market to sell, etc helps companies to prosper which leads to appreciation in stock prices over the time. India is one of the fastest growing large economies of the world and hence the Indian equities are an attractive investment option.
  2. In order to support economic growth, companies may have to borrow money for expansion. When interest rates are high, companies are not motivated to borrow and this affects the economic growth. Interest rates in India have come down significantly over the years, which not only makes borrowing cheap for companies to grow but also gives rise to higher inflation. In rising inflation and reducing interest rate economies, investing your money in debt assets such as bonds, FDs, RDs, etc will fail to give you a growth in returns and at times returns are even below inflation rate. While, investments in equities provide an opportunity to earn better returns in such economies.
  3. Government and RBI use several techniques to control inflation when the inflation rate goes up beyond a threshold limit, one such technique is to increase the interest rate. However, such measures are only for short to medium-term. As interest rate cannot be kept high for a prolonged period, doing that may impact the growth of the country. Moreover, limited availability of resources will push inflation high which in a high interest economy may lead to a recession. Hence, you would see that interest rates on debt instruments will be regularly going down in a certain time span but equities shall be performing better.
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Hence, equity mutual funds are the top mutual funds in India for investing. Even based on the past performance, you will see that equity mutual funds have outperformed all other mutual funds in India mainly due to the economic growth within the country. 

Below are few best mutual funds for investments for September 2022:

Axis Blue chip Fund – Growth 1.65 14.56 13.90 14.0
Canara Robeco Blue chip Equity Fund – Growth 5.19 18.47 16.20 14.4
UTI Master Share Fund – Growth 4.68 19.55 15.34 13.5
Aditya Birla Sun Life Frontline Equity Fund – Growth 7.88 20.37 14.70 13.4
ICICI Prudential Large & Mid Cap Fund – Growth 14.6 28.16 19.14 15.0

*Past performance is not indicative of future return *Returns are annualized and in % figures *Performance is as on 30-08-22

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