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Top 7 handpicked mutual funds by Scripbox in 2020

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Before we go on to list some of the best mutual funds for you, let us discuss a few fundamental things that you need to keep in mind while selecting a mutual fund.  

What is a Mutual Fund?

A mutual fund is a financial vehicle created from an assortment of money gathered from multiple investors to invest in bonds, stocks, cash or a combination of these assets. The mutual funds are managed by fund managers who use the pooled capital on investing in a set of assets to fulfill the fund’s investment goals.

Ways of Investing in Mutual Funds

There are two primary ways of investing in a Mutual Fund:

  • Systematic Investment Plan: Periodically invest in a fixed sum of the amount over a fixed time duration. In this plan, the cost of investment is lower because investing money at a regular investment allows the fund manager more liberty to buy maximum shares when their prices are low, and less when their prices are high. This plan is tailor-made for short-term investors. 
  • One-time Investment: Invest a one-time lump sum amount. In this plan, the cost of investment is higher as the investment is made in one shot. This plan is recommended for investors aiming to stay invested for the long-term.

Worry less about managing your finances by investing in the best mutual funds. Image Source: freepik.com

Identifying Goals and Risk Tolerance

The penultimate step before choosing the best mutual fund is to clarify your goal in investing. Ask yourself the probing question as to why you want to invest and what is your expectation out of the investment. Aligning your financial goal with the mutual fund investment plan is a powerful method to select the best mutual fund schemes as per the time frame of the financial goal and your risk profile. One thing to note here is that the investment horizon will significantly modify the suitability of a mutual fund scheme for even the same financial goals. 

Now, based on your risk tolerance the mutual funds can be classified into: 

    • Low risk: These investments are made by those with low-risk tolerance with their money. In these cases, investment should be made in places like the debt market. The investments also tend to be long-term investments, and the returns on these investments are also generally low. An example of such investment would be in gilt funds that are in government securities.
    • Medium Risk: These investments come with a medium amount of risk for the investor. These are suited for those willing to take some risk with the investment and get higher returns in comparison to low-risk mutual funds. These investments can be used to amass wealth over a longer time period.
  • High Risk: These mutual funds are perfect for those willing to take higher risks with their investments. An example of high-risk funds is the inverse mutual funds. Despite having higher risks, they tend to offer significantly higher returns.

Scripbox’s Hand-picked Best Mutual Funds for 2020:

 

  • Axis Bluechip Fund: Three-year return on investment is estimated at 8.71% and for five years its estimated return is at 6.22%. The fund consists of 78.61% investment in Indian stocks among which 72.11% is in large-cap stocks and 0.27% is in mid-cap stocks. The fund has 0.23% investment in Debt of which 0.23% is in funds invested in very low-risk securities.

 

    • Mirae Asset Large Cap Fund: Fund contains 98.31% investment in Indian stocks among which 70.97% is in large-cap stocks, 13.9% is in mid-cap stocks, 3.37% in small-cap stocks. It is suitable for investors looking to invest for a minimum of 3-4 years and expecting high returns. However, they should also be prepared for the possibility of moderate losses in their investments.    

 

  • ICICI Prudential Bluechip Fund: Three-year return on investment is estimated at -0.61% and for five years its estimated return is at 2.23%. The fund contains 94.41% investment in Indian stocks of which 80.75% is in large-cap stocks, 3.93% is in mid-cap stocks, 0.54% in small-cap stocks. The fund has 2.54% investment in Debt of which 0.49% in Government securities, 2.05% in funds invested in very low-risk securities. It is suitable for investors looking to invest for a minimum of 3-4 years and expecting high returns. However, they should also be prepared for the possibility of moderate losses in their investments.
  • Nippon India Low Duration Fund: Three-year return on investment is estimated at 7.12% and for five years its estimated return is at 7.63%. It is suitable for investors looking to invest for 1-3 years and can be considered as an alternative to bank deposits.
  • UTI Short Term Income Fund (Institutional): Three-year return on investment is estimated at 3.07% and for five years its estimated return is at 5.32%. The fund consists of 91.26% investment in Debt of which 39.69% is in Government securities, 44.18% is in funds invested in very low-risk securities. It is suitable for investors looking to invest for 1-3 years and can be considered as an alternative to bank deposits.
  • Aditya Birla Sun Life Savings Fund: The fund contains 97.33% investment in Debt of which 5.85% is in Government securities, 91.49% is in funds invested in very low-risk securities. It is suitable for investors looking to invest for a very short time period and can be considered as an alternative to bank deposits or accounts.

 

  • JM Core 11 Fund: The fund contains 97.64% investment in Indian stocks among which 79.32% is in the large-cap stocks, 8.95% is in the mid-cap stocks. Investors with detailed knowledge of market trends and willing to take selective risks for higher returns compared to other Equity funds are preferred. However, they should also be ready for the likelihood of moderate to high losses even if the overall market is performing better. 

A Word of Caution

In the present context of the COVID-19 crisis, the market is in turmoil and is apprehended to plunge into recession in the near future. It is advisable to stick to large-cap mutual funds to play it safe. The reason is that very large companies with deep pockets would be able to withstand the present economic uncertainty. Thus, our selection of the best mutual funds by Scripbox contains more large-cap mutual funds.