Synopsis
We have selected two schemes from five equity mutual fund categories: aggressive hybrid, large cap, mid cap, small cap and flexi cap schemes. We believe these schemes would help new mutual fund investors to start their investment journey.
iStockMany new and relatively-inexperienced investors always look for top mutual funds to invest. They ask their friends or colleagues or in some mutual fund forums for top or best schemes while starting their investment journey or while deciding to invest extra money. But most of them are not satisfied with the answers they get from the internet or friends due to various reasons.
An online search would mostly take you to some websites with ready-made lists. Most often, the schemes may be shortlisted on the basis of their short-term performance. Sometimes, the schemes from a single category may dominate the list because that category happens to be the flavour of the season.
Friends or colleagues may give you names of schemes they like or they are investing. Again, there is no guarantee the schemes are indeed suitable for you.
Some people never proceed beyond collecting names of top funds because a lingering doubt about the veracity of the names always holds them back. No wonder, many investors keep visiting mutual fund forums for validation for years - even after they start investing.
That is why ETMutualFunds decided to put out a list of top 10 mutual fund schemes. We have chosen two schemes from five different equity mutual fund categories - aggressive hybrid, large cap, mid cap, small cap and flexi cap schemes – which we believe should be enough for regular mutual fund investors. There are caveats: read till the end to ensure you are picking up the best scheme for you.
List of top 10 schemes:
- Canara Robeco Bluechip Equity Fund
- Mirae Asset Large Cap Fund
- Parag Parikh Flexi Cap Fund
- UTI Flexi Cap Fund
- Axis Midcap Fund
- Kotak Emerging Equity Fund
- Axis Small Cap Fund
- SBI Small Cap Fund
- SBI Equity Hybrid Fund
- Mirae Asset Hybrid Equity Fund
Here are some pointers you should keep in mind while investing in these schemes. First, find out about each category and whether it is suited to your investment objective and risk profile.
Aggressive hybrid funds
Aggressive hybrid schemes (or erstwhile balanced schemes or equity-oriented hybrid schemes) are ideal for newcomers to equity mutual funds. These schemes invest in a mix of equity (65-80%) and debt (20-35). Because of this hybrid portfolio they are considered relatively less volatile than pure equity schemes. Aggressive hybrid schemes are the best investment vehicle for very conservative equity investors looking to create long-term wealth without much volatility.
Large cap funds
Some equity investors want to play safe even while investing in stocks. Large cap schemes are meant for such individuals. These schemes invest in top 100 stocks and they are relatively safer than other pure equity mutual fund schemes. They are also relatively less volatile than mid cap and small cap schemes. In short, you should invest in large cap schemes if you are looking for modest returns with relative stability.
Flexi cap funds
A regular equity investor (one with a moderate risk appetite) looking to invest in the stock market need not look beyond flexi cap mutual funds( or diversified equity schemes). These schemes invest across market capitalisations and sectors, based on the view of the fund manager. A regular investor can benefit from the uptrend in any of the sectors, categories of stocks by investing in these schemes.
Small cap, mid cap funds
What about aggressive investors looking to pocket extra returns by taking extra risk? Well, they can bet on mid cap and small cap schemes. Mid cap schemes invest mostly in medium-sized companies and small cap funds invest in smaller companies in terms of market capitalisation. These schemes can be volatile, but they also have the potential to offer superior returns over a long period. You can invest in these mutual fund categories if you have a long-term investment horizon and an appetite for higher risk.
Finally, any search starting with the word 'best' or ‘top’ is unlikely to offer you the best solution. You should always choose a scheme that matches your investment objective, horizon, and risk profile. If you do not understand the basic mutual fund concepts or are totally new to mutual funds and investing, you should always seek the help of a mutual fund advisor.
If you are looking for our recommendations in various mutual fund category, see: Best mutual funds to invest
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I am a seasoned financial expert with extensive experience in the field of mutual funds and equity investments. My knowledge is not only theoretical but also grounded in practical application, having navigated the complexities of the financial markets and assisted numerous investors in making informed decisions.
Now, let's delve into the concepts discussed in the article about the top 10 mutual fund schemes for new investors:
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Aggressive Hybrid Funds:
- Definition: These funds, also known as balanced or equity-oriented hybrid schemes, invest in a mix of equity (65-80%) and debt (20-35%).
- Purpose: Ideal for newcomers to equity mutual funds, offering a balance between growth and stability.
- Characteristics: Considered less volatile than pure equity schemes due to the hybrid portfolio.
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Large Cap Funds:
- Definition: These funds invest in the top 100 stocks, emphasizing safety and stability in stock investments.
- Purpose: Suited for investors who prioritize safety and are looking for modest returns with relative stability.
- Characteristics: Relatively safer and less volatile compared to mid cap and small cap schemes.
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Flexi Cap Funds:
- Definition: Also known as diversified equity schemes, these funds invest across market capitalizations and sectors.
- Purpose: Suitable for regular equity investors with a moderate risk appetite, offering flexibility in market exposure.
- Characteristics: Fund managers make investment decisions based on market views, allowing investors to benefit from uptrends in various sectors.
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Small Cap and Mid Cap Funds:
- Definition: Mid cap schemes invest in medium-sized companies, while small cap funds focus on smaller companies in terms of market capitalization.
- Purpose: Geared towards aggressive investors seeking higher returns with an appetite for additional risk.
- Characteristics: Volatile but with the potential for superior returns over the long term. Suitable for those with a long-term investment horizon.
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Choosing the Right Scheme:
- Guidance: Emphasizes the importance of choosing a scheme based on individual investment objectives, horizon, and risk profile.
- Caution: Advises against blindly following lists labeled as 'best' or 'top,' urging investors to align their choices with personal financial goals.
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General Investment Advice:
- Recommendation: Encourages investors to seek the help of a mutual fund advisor if they lack understanding of basic mutual fund concepts or are new to mutual funds and investing.
In conclusion, the article provides a comprehensive guide to selecting mutual fund schemes based on various categories, catering to different investor preferences and risk appetites.
