What is the best Mutual Fund for me?

Selecting the best Mutual Fund can be a difficult task especially when you are a first time investor with little …

Selecting the best Mutual Fund can be a difficult task especially when you are a first time investor with little or no investing experience. But that should not stop you from taking the first step towards a better and secure financial future. 

Top 3 things to keep in mind before investing:

  1. Investment Objective: What is the financial goal that you want to reach through your investment. For e.g. save 5 Lacs for your kid’s education
  2. Investment Duration: How long can you stay invested without selling your Mutual Funds. For e.g. less than 1 year, 3-5 years, etc
  3. Risk Appetite: What is the risk level that you are comfortable with? Or how will you react if your investment loses value due to market fluctuations? Will you continue to stay invested and ride out the volatility or will you panic and pull out of your investments?  

All things considered, here’s a quick guide to help you select the ideal investment for you?

  1. You want to invest for the long term: If you have a long term objective ( > 3 years ) – say, retirement planning, child’s are willing to assume some risk, then an Equity or Balanced Fund would be ideal.

Here are our top recommendations: 

Fund Name Category 3 Year Returns 5 Year Returns Recommended investment duration
Reliance Large Cap Fund Equity – Large Cap 13.90% 13.40% 3 – 5 Years
ICICI Pru Bluechip Dir Gr Equity – Large Cap 11.68% 12.05% 3 – 5 Years
Reliance Growth Dir Gr Equity – Mid Cap 10.34% 12.27% > 5 Years
DSP Midcap Fund Equity – Mid Cap 10.00% 14.73% > 5 Years

 

2. You want to invest for the short term: If you have a very short term objective (0 – 3 Years)  – say, money to be kept aside for a few months for an emergency, or want to regularly save while retaining liquidity; a Liquid Fund would be ideal. For short term objectives, it is recommended to invest in Debt Schemes that are low risk and low volatility. Equity Funds, though potentially offering higher returns can be volatile for shorter durations. 

 

Fund Name Category 3 Year Returns 5 Year Returns Recommended investment duration
Reliance Liquid Fund (available under Kwik Save) Liquid Fund 7.21% 7.74% 0-3 Years
ICICI Prudential Liquid Liquid Fund 7.13% 7.68% 0-3 Years
IDFC Cash Fund Liquid Fund 7.06% 7.63% 0-3 Years

 

After deciding on the type of fund to invest in, a decision on the specific scheme from an AMC would have to be made. These decisions are usually made after ascertaining the AMC’s track record, the suitability of scheme, portfolio details, etc.

Scheme Factsheets and Key Information Memorandum are two documents that every investor needs to peruse before investing. If one needs detailed information then one should look at the Scheme Information Document. All of these are easily accessible at every Mutual Fund’s website

Note: Returns are accurate as on July 15, 2019