What Are Mutual Funds?

A mutual fund is a type of financial instrument that pools money from investors to buy stocks, bonds, gold, and other assets. Companies eligible to establish mutual funds establish Asset Management Companies (AMCs) or Fund Houses, which collect investor cash, promote mutual funds, handle investments, and facilitate investor transactions.

The expense ratio is the cost to the investor that the AMC levies for managing the best mutual funds in India. It varies from mutual fund to mutual fund and is not a set cost. The maximum expense ratio that can be charged based on the fund's total assets has been fixed by SEBI.

Mutual funds are financial vehicles that combine capital from several individuals to buy various securities, including stocks, bonds, and other assets. Investors buy shares in the mutual fund, and the fund then invests the money in various assets picked by a skilled fund manager. The success of the underlying investments determines how well the mutual fund performs.

Mutual funds are managed by reputable financial experts specializing in investment analysis and portfolio management, known as fund managers. According to the mutual fund investment objective, fund managers invest the money raised from investors in various financial assets, including stocks, bonds, and other assets. The fund managers are responsible for multiple tasks, including deciding on the best-performing mutual funds.

With the help of mutual funds, individual investors may access a varied portfolio of assets, which can be expensive or impossible to do on their own. Mutual funds are also well-liked since they have the potential to provide larger returns than conventional savings accounts and because buying and selling them is relatively easy.

Furthermore, Mutual funds are regulated by the Securities and Exchange Board of India (SEBI). Therefore, Going through the SEBI mutual funds guidelines and documentation is advisable.

Benefits of Mutual Funds

Professionally Managed

One of the key benefits of investing in these funds is that professional money managers manage your money with years of investing experience.

Liquidity

Mutual funds provide high levels of liquidity, allowing investors to purchase or sell their shares at any moment. Due to this, mutual funds are a practical and adaptable investing choice for individuals that want immediate access to their money.  

Returns

Unlike ordinary savings accounts, mutual funds may provide better returns, even though returns depend on market conditions.

Affordability

You can start investing in mutual funds with a minimum amount, such as Rs 500.

Diversification

Investors can access various investments through mutual funds, including stocks, bonds, and other assets. By spreading risk among many investment types, this diversification reduces the portfolio's exposure to any one investment.

Well Regulated

Government agencies, like SEBI, have the power to regulate mutual funds, which helps to guarantee that they are run in the investors' best interests. Investors may make educated investing decisions since mutual funds must provide information about their investments, fees, and performance.

Ways to Invest in Mutual Funds

SIP (Systematic Investment Plan)

SIP enables you to invest a certain amount over time. Due to its convenience, SIP is one of the most suggested methods for investing in the best-performing mutual fund schemes. Additionally, it aids in averaging the price at which you acquire the units of these funds. Find out more about Systematic Investment Plans (SIPs) here.

Lumpsum

A lump sum investment is one that you make once. People typically make lump sum investments after receiving a large quantity of money, such as bonuses or cash from the sale of an asset.

Types of Mutual Funds Based on Asset Class

In India, mutual funds are divided into various groups according to the asset classes they invest in. Here are a few general categories.

Equity Mutual Funds

Most of the assets that equity funds hold are equities. These funds are divided into various groups based on the market capitalization of the stocks they invest in.

Large-Cap Funds

These funds put at least 80% of their money into the top 100 market-cap corporations.

Mid-Cap Funds

These funds allocate at least 65% of their resources to the following 150 (101st to 250th) market capitalization-ranked companies.

Small-Cap funds

In such funds, at least 65% of the assets are allocated to investments in firms with market capitalizations of 251 and above.

Multi-Cap Funds

At least 25% of the assets in these funds are allocated to large, mid, and small-cap companies.

Debt Mutual Funds

Debt funds make money by lending to businesses and the government while also purchasing debt-related securities. These funds are divided into groups based on the lending period's length and the papers' creditworthiness.

Money Market Funds

These funds

create returns by making short-term loans to businesses or governments for up to a year.

Corporate Bond Funds

These funds generate returns by loans to businesses with the highest-rated debt documents (at least 80%).

Overnight funds

These funds generate returns by lending money to businesses or governments for one business day.

Liquid Funds

These funds earn profits by making up to 91-day loans to businesses or governments.

Hybrid Funds

Equity, debt, and gold are just a few of the asset groups that hybrid funds may invest in. Hybrid funds can be divided into several types based on how much money they invest in various asset classes.

These funds must invest at least 65% of their assets in stocks but can support up to 80%. The remainder is owed.

Balanced Hybrid

Depending on the fund manager's assessment of the market environment, these funds may invest up to 40–60% in equities and debt securities.

Dynamic Asset Allocation Funds

These funds, also known as Balanced Advantage Funds, follow established asset allocation strategies and can hold up to 0–100% of their assets in either equities or debt.

Arbitrage Funds

These funds use the opportunities presented by securities' price discrepancies in several marketplaces to create returns.

Best Investment Themes

Mutual Funds for Beginners

Start your investments with ELSS (Tax Saving Schemes) and Aggressive Hybrid Funds, which can invest 65-80% in stocks. These are one of the best mutual funds in India.

Best SIP Funds

Selected funds that have regularly outperformed their counterparts regarding SIP returns are included on the list

ELSS (Tax Saving Funds)

The twin benefits of wealth creation and tax savings are the investing goals of these funds. Investing in ELSS can reduce your yearly tax liability by up to Rs. 46,800.

Value Investment Funds

These funds make money by investing in businesses whose stock price is trading below the value of their assets.

International Funds

By exposing you to businesses that aren't listed on Indian stock exchanges, these funds can help you diversify your portfolio geographically and lower risk overall.

How Can You Invest In Mutual Funds?

Wright Research offers three straightforward procedures for making mutual fund investments that are comfortable, easy, and quick:

How to build a mutual fund portfolio with Wright Research

Wright Research is an online financial advisor in India with the vision of helping people find knowledgeable and safe investment options. Our portfolio of mutual funds is carefully crafted using data sciences and AI technology. The allocation of funds is based on the investor's risk tolerance for a personalized experience and adhering to SEBI guidelines and regulations. Wright Research provides a seamless investing experience, always considering your risk tolerance and goals.

Here’s how you can start building a mutual fund portfolio with Wright Research:

Benefits of investing with Wright’s Mutual Fund Platform:

Precision-targeted risk: We evaluate your level of comfort with risk and create a diversified mutual fund strategy that is tailor-made for you.

AI drives market projections: Our intelligent platform foresees market developments and modifies your allocations to increase potential returns.

AI-curated perfection: We choose the ideal combination of mutual funds suited to your investing profile using AI-driven performance and risk forecasts.

Data-driven investing: Understanding the market scenario is important before investing. The Mutual Fund Transaction Platform from Wright Research is your key to a worry-free, data-driven investing experience!

Semi-annual rebalancing: Our platform rebalances your assets every six months to keep expenses down and guarantee top performance.

Which are the top mutual funds to invest

Mutual funds are considered a solid investment choice For a variety of reasons. But the main reason is diversification. Their capacity to offer diversification is a crucial benefit. Mutual funds can diversify assets by providing a mixture of securities, including stocks, bonds, or both. Therefore, In India, Investors choose Mutual funds to invest in. However, identifying the top 10 or determining the ideal mutual fund can be complex.

The main factor that makes this choice difficult is risk profile and investment timeframe.

A risk profile refers to how comfortable someone takes risks and investment time period. People willing to take on more risks may invest in high-risk funds, while those who avoid risks choose low-risk funds. It's also important to consider the investment timeframe - high-risk funds are more suitable for long-term goals, while lower-risk investments are better for short-term objectives. Moreover, It is important to note that mutual funds are subject to market risks, and past performance does not indicate future results. Therefore, assessing risk tolerance and investment goals before investing is crucial.

Mutual funds are classified according to the type of assets they hold, such as equity, debt, or gold. There are three main categories:

Each category has its own risk profile and investment goals. Since every investor has investment objectives, risk tolerance, and time horizon, there is no one-size-fits-all mutual fund.

Let's take an example for a better understanding. Suppose you want to invest money today to pay for your child's higher education in 15 years. Given the long-term nature of this objective, equities mutual funds could be a good choice.

When it comes to investing in equities, there are different subcategories, such as large-cap, mid-cap, and small-cap funds. The choice between investing in large-cap or small-cap funds depends on your risk tolerance. Large-cap funds primarily invest in established, financially stable companies that lead the market. As a result, they are less risky than small-cap funds. These larger companies are better equipped to handle economic downturns compared to smaller ones.

It's essential to understand that investors can have multiple objectives. For example, if your plan is to buy a sedan in the next three years, investing in equity funds may not be the best option. Instead, you can consider debt mutual funds that provide lower volatility and can help you achieve your goal of purchasing a sedan.
A deep understanding of investing in mutual funds keeps your investment safe and provides higher ROI. Now that you understand how different goals need different investment strategies while investing in mutual funds, you can easily choose and compare mutual funds as per your preference. But for now, we have researched the best mutual funds in 2023 for you.

Here is the list of the top 10 mutual funds that you should consider investing in 2023:

1.Canara Robeco Bluechip Equity Fund

2. Mirae Asset Large Cap Fund

3.Parag Parikh Flexi Cap Fund

4.UTI Flexi Cap Fund

5 Axis Midcap Fund

5.Kotak Emerging Equity Fund

6.Axis Small Cap Fund

7.SBI Small Cap Fund

8.SBI Equity Hybrid Fund

9.Mirae Asset Hybrid Equity Fund

Still, trying to understand which mutual fund to choose as per your goal?

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