Mutual funds investment is one of the popular schemes these days. These funds are commenced when Assets Management companies collect investments from interested investors or institutional investors with the objective of investment. An expert fund manager with his expert fund, management skills invests these pooled investments on the purchase of stocks and bonds.

Mutual Fund is one the best investment scheme when individuals don’t want to lock in the investment for a longer duration of time or expecting early withdrawals with some profit. These kinds of investments can be diversified into various funds. Each investor is provided with a portfolio reflecting the unit-based amount they invested and experience profit & losses accordingly. The performance of Mutual funds is dependent on the underlying assets.

Types of Mutual Funds

Broadly, we can broadly categorize mutual funds into three categories depending upon asset allocation and equity exposure. According to which one can imagine the risk and assume the returns on the investment. In-depth detail of each type and further categories are given below: –

Equity Funds

Equity funds are invested in equity shares of all companies across the market capitalizations. These funds are expected to offer the highest returns among all the mutual fund types and classes. A mutual fund is categorized under equity fund if it invests at least 65% of its portfolio in equity instruments. The returns are dependent upon two major factors i.e. geopolitical and economic factors. Equity funds can further be categorized into: –

  • Small-Cap Equity Funds
  • Mid-cap Equity Funds
  • Large-cap Funds
  • Multi-cap Equity Funds
  • Index Funds
  • ELSS Equity Funds

Debt Mutual Funds

Debt mutual funds are invested in debt, treasury bills, government bonds, commercial papers, certificates of deposit, and other highly rated securities. These types of mutual funds generate fixed income that a buyer can earn on the maturity of the fund. These instruments have a pre-decided date of maturity on which the investor can withdraw his investment with a fixed rate of return. Such kind of investment is ideal for those who don’t want to bear any risk on their investment as debt mutual funds are not influenced by market fluctuations. The returns provided by Debt mutual funds are fixed or predictable. Furthermore, these funds can be divided into the following types: –

  • Dynamic Bond Funds
  • Income Funds
  • Short-Term Debt Funds
  • Liquid Funds
  • Gilt Funds
  • Credit Opportunities Funds
  • Fixed Maturity Funds

Hybrid or Balanced Mutual Funds

Hybrid mutual funds are also known as balanced mutual funds that best suggests the idea of investing in both equity and debt instruments sometimes Gold and real estate are also included in it. The main aim of investing in hybrid mutual funds is to diversify the portfolio risk ratio. The allocation of each asset is decided by the fund manager depending upon the market condition keeping in mind the objective of profit and reduced risk levels.

Hybrid funds are an excellent way of diversifying the portfolio and balancing the investment in both equity and debt mutual funds. These investment options that lie within the assets class exhibit a higher level of correlation in return, whereas across the asses class investment shows little correlation in return.

The hybrid of balanced mutual funds are further classified into-

  • Equity-Oriented Hybrid Funds
  • Debt-Oriented Hybrid Funds
  • Monthly Income Plans
  • Arbitrage Funds

Who should invest in Mutual Funds?

Anyone can invest in Mutual funds who have a particular financial goal with a good amount of returns and minimum risks. Investing in Mutual funds is the best option for boosting up your savings and achieving your financial goals quickly. Investors need to calculate risk profile, the amount that they want to invest, goals that investors want to achieve via investment, time period of investing. For example, your financial goal is to buy a car in five years, then investing in gilt funds. If your plan is to buy a house in the period fifteen to twenty years, then you may choose equity funds.

Why should you invest in Mutual Funds?

1. Investment Is managed by experts

It’s the fund manager’s decision who decides to manage the investment pooled by the Asses Management Companies (AMC’s). These fund managers are professionals in their field who have expert knowledge of the market and managing portfolios. Fund managers have their own professional team of analyst that tells him/her about the market situations, top-performing mutual funds on the basis of which fund manager decide about the investment. This market research is the most vital part of mutual fund investment that provides excellent returns to investors in return.

2. Premature Withdrawal is also possible

Mutual funds provide the major benefits of no lock-in period which means Investment once made can be withdrawn in case of need or emergency. One can withdraw the money before the maturity period but with some penalty (applicable to some cases). Otherwise, most of the mutual funds are open-ended that comes with exit-leads on redemption.

3. Low Expense ratio For Expert Management

Investing in mutual funds is the best scheme for small investors who want to start an investment with a very low amount. Mutual fund house and AMC’s charges a very small amount known as expense ratio for the management of investors fund. Generally, it lies between 0.5% to 1.5% of the amount invested by the investor.

4. Start investing from Low amount

The most noticeable advantage of mutual fund investment is that investment can be started from a very low amount. Small investors find mutual fund investment the best option as it can be started from INR 500. Systematic Investment Plan SIP enables you to decide the amount you want to invest, the frequency of investment, investment in parts of lump sum investment, and so on. It can be called profit in your comfort zone. The benefit from SIP depends upon the term for investment and market situations.

5. Diversification of Funds

Diversification is another reason why one should invest in Mutual Funds. Mutual funds can be invested in various asset classes and shares of different-different companies. So, if one asset fails to perform great as per the expectations other assets profit may compensate for that. It reduces the concentration of risk to a greater extent.

6. High Degree of Liquidity

As stated below that there is no lock-in period in mutual fund investment, ultimately it provides a high degree of liquidity. Due to which one can easily withdraw their investment in times of financial crisis or some unfavorable market conditions. The process for amount withdrawal is extremely easy, unlike other investment options. The money will be credited to your account by Asset Management Company or fund house with 3-7 business days on the request of redemption.

Top Performing Mutual Funds

Check out the list of best mutual funds to invest in India on the basis of types, performance, and investment period.

Mid-Cap Equity Funds

Mid Cap Fund Crisil Rank AUM (Cr) 1 M 6 M 1 Y 3 Y 5 Y
Taurus Discovery (Midcap) – D (G) 4 0.70 -0.40% 21.00% 11.80% 3.50% 9.70%
DSP Mid Cap – Direct (G) 4 1,005.24 0.40% 24.50% 11.60% 4.90% 11.90%
Taurus Discovery (Midcap) (G) 4 43.54 -0.50% 20.80% 11.40% 3.00% 9.20%
Invesco India Midcap – D (G) 5 148.10 -1.30% 23.30% 11.30% 6.00% 10.80%
DSP Mid Cap – Regular (G) 4 5,365.50 0.30% 23.90% 10.60% 4.00% 10.90%


Debt Mutual Funds

Medium Duration Fund Crisil Rank AUM (Cr) 1 M 6 M 1 Y 3 Y 5 Y
SBI Magnum Medium Duration Fund – D (G) 4 730.00 2.10% 8.20% 13.40% 10.00% 10.80%
SBI Magnum Medium Duration Fund (G) 4 2,531.96 2.10% 8.00% 12.90% 9.40% 9.90%
Tata Medium Term – Direct (G) 4 24.68 1.70% 7.60% 12.70% 2.40% 5.10%
Axis Strategic Bond Fund – D (G) 4 194.54 1.60% 7.20% 11.30% 8.40% 9.10%
ICICI Pru Medium Term Bond (G) 4 4,322.43 1.50% 8.10% 11.10% 7.70% 8.10%


Hybrid Mutual Funds

Aggressive Hybrid Fund » Crisil Rank AUM (Cr) 1 M 6 M 1 Y 3 Y 5 Y
CR Equity Hybrid Fund – DP – (G) 5 78.91 2.80% 16.10% 9.20% 8.60% 10.60%
CR Equity Hybrid Fund – RP – (G) 5 2,773.48 2.70% 15.40% 7.90% 7.30% 9.30%
IDBI Hybrid Equity Fund – DP (G) 4 4.32 2.20% 15.80% 5.20% 1.90% 0.00%
IDBI Hybrid Equity Fund – RP (G) 4 187.16 2.20% 15.30% 4.30% 0.40% 0.00%
DSP Equity & Bond Fund – Regular (G) 4 4,943.41 3.60% 15.80% 2.60% 4.80% 8.60%

How to Invest in Mutual Funds?

Investing in mutual funds is an extremely simple process. Invest Market makes it even easier as it has in-house experts having expert knowledge about market situations and top-performing mutual funds. Our expert fund managers have invested a lot of their time in the research of top fund house and offers you best guidance for getting maximum returns. Follow the given steps to start investing in mutual funds now-

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What type of Mutual Funds are best suitable for you?

What is the best time to invest in Mutual Funds? Actually, there is no such term in mutual fund investment. The fund managers try to invest your money in the right securities and assets that are going to benefit the investors, instead of fluctuating market conditions.  If you are investing via a SIP, then you are going to benefit from both down and high market cycles. When the markets are down, you end up buying more fund units as the stock prices would have fallen to their fresh lows, and when the markets shoot up, you buy lesser units. This is called the rupee cost averaging. So now you need not wait for any particular time to invest in Mutual funds.

Expert Advice- Best Mutual Fund To Invest

Mid-cap mutual funds are ideal best suited and preferred to those investors that can bear high-risk. If things go well then the investor can expect high returns otherwise can go adverse as well in the opposite situations. These are best suited for people who are diversifying investment in their portfolio. The benefits of mid-cap mutual funds are high returns after all you bear the maximum risk.

FAQ’s- Frequently Asked Questions

Are mutual funds invested in stocks only?

No, mutual is not invested in stocks only except the equity funds that invest in a stock. Some debt and liquid funds also invest in stocks but there’s hardly any possibility. Some of the debt funds never ever invest in stocks.

What is the term exit load in mutual fund investment means?

Exit load is the fees charged by the AMC or fund house when you are not able to keep your investment for a particular period of time. However, not every mutual fund investment charge exit load, most of the mutual funds are open-ended. So, it is suggested to read the fund carefully before investing.

What does the expense ratio mean?

It is the management fees charged by the fund houses and Asset Management companies. The expense ratio is always less than 2.5% of the amount invested by investors.

Is it safe to invest in mutual funds?

Yes, it is extremely safe to invest in mutual funds as it comes under the Securities and Exchange Board of India(SEBI), Association of Mutual Funds in India (AMFI), and Reserve Bank Of India(RBI).

How can I redeem the Mutual Funds Unit?

Mutual funds units can be redeemed anytime. On the redemption of mutual funds, the amount will be credited to your bank account within 3-7 business days.

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