Best mutual funds to invest in 2019
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:
Large cap diversified funds should form the core of your investment holdings.
Equity Large and Mid Cap:
These funds are diversify their investments in between large and mid-cap companies.
Equity Small and Mid-Cap:
Small and mid-cap focused funds are more volatile, but can often help boost overall returns of your portfolio. These are suitable for investors who have the ability to take on higher risk of losses.
Multi Cap funds in stocks of companies across large cap, mid cap, small cap stocks with a goal to maximize profits.
An index fund attempts to replicate the performance of a given index of stocks
Tax Saving Equity Funds (ELSS):
In order to reduce your tax bill, you can invest up to Rs 150,000 a year in Tax Saving (ELSS) funds under section 80C of the Income-tax Act.
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.
How did we arrive at the Best Mutual Funds list
Our objective is to design a data-driven predictive model that optimizes the 2-year returns on Equity Funds with minimal volatility.
We started with the entire universe of mutual funds and selected only growth options, which are best suited from a tax perspective. We limited our analysis to only diversified equity mutual funds — a mix of Large Cap, Flexi Cap, Mid & Small Cap, Index, ELSS funds helps investors achieve the required sector diversification, and avoids the volatility that comes with holding sector-specific funds.
We then eliminated funds which have been in existence for less than 3 years — we need a track record that the fund can be judged on. To make sure that you can redeem your investments with minimal price impact when needed, we set the minimum size cut-off to Rs 500 crore for Large Cap funds and Rs 150 crore for all other funds.
We collected all the possible data for these funds and threw this into a big-data statistical computing environment with one goal — to identify the factors that would determine 2-year performance. Our statistical model analysed 30 possible factors generating more than one million data points for our study.
After several iterations studying longitudinal trends within the data, we were able to identify a number of factors that would predict 2-year outperformance. We recomputed these factors every two weeks going back in time to the inception of each fund, and back-tested this again, to ensure that the factors work across market cycles. The result is a sophisticated scoring algorithm that enables us to continuously identify optimal funds
This post has been reviewed by Kunal Bajaj.
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.