MF Query Board

Could you guide me about the top 10 mutual funds to invest in 2023? - Mayuri Agarwal[EasyDNNnews:PaidContentStart]

Many investors in mutual funds, especially those who are new, have less experience. The majority of the time the schemes may be shortlisted based on how well they function. Sometimes, since a particular category is currently popular, the schemes from that category may dominate the list. Some people might use a wrong method. Again, there is no assurance that the programmes will be appropriate for you. We feel that two of the five categories of equity mutual fund schemes we have chosen—aggressive hybrid, Large-Cap, Mid-Cap, Small-Cap, and flexi-cap schemes— should be sufficient for ordinary mutual fund investors. There are warnings, so make sure you choose the best plan for you by reading all the way through.

Here is the 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 Mid-Cap Fund
■ Kotak Emerging Equity Fund
■ Axis Small-Cap Fund
■ SBI Small-Cap Fund
■ SBI Equity Hybrid Fund
■ Mirae Asset Hybrid Equity Fund

You should bear the following advice in mind before investing in these programmes. Learn more about each category first and then decide if it fits your risk tolerance and investing goals. For people new to equity mutual funds, aggressive hybrid schemes—also known as former balanced schemes or equity-oriented hybrid schemes—are the best option. These investments are split between loan (20–35 per cent) and equity (65–80 per cent). They are seen as being significantly less volatile than pure equities schemes because of their hybrid portfolio. The greatest investment vehicle for extremely cautious equities investors wanting to build long-term wealth without much volatility is an aggressive hybrid plan.

Even when investing in equities, some equity investors prefer to be safe. Such people are the target audience for large-cap schemes. These mutual fund schemes are somewhat safer than other pure equities mutual fund schemes because they invest in the top 100 stocks. Additionally, they have a lower volatility than mid-cap and small-cap schemes. In conclusion, if you want to invest in large-cap schemes and find modest returns with some stability, you should. Some equity investors want to play it safe, even while investing in equities. These individuals make up the target market for large-cap schemes.

Because they invest in the top 100 stocks, these mutual fund schemes are a little bit safer than other pure equities mutual fund schemes. They also have less volatility than small and mid-cap schemes. In summary, you should invest in large-cap schemes if you wish to discover modest returns with some stability. What about risk-taking investors who are hoping to earn higher returns? They can wager on mid-cap and small-cap projects, I suppose. In terms of market capitalisation, mid-cap schemes often invest in medium-sized companies whereas small-cap funds do the same.

These strategies have the potential to provide higher returns over a lengthy period of time, but they can also be volatile. If you are willing to take on more risk and have a long-term investing goal, you can invest in these mutual fund categories. Finally, it’s improbable that any search that begins with ‘best’ would provide you with the finest answer. Always pick a plan that aligns with your financial goals, time horizon, and risk tolerance. Always seek the advice of a mutual fund advisor if you are completely new to investing or if you do not grasp the fundamentals of mutual funds.

I have annual income of nearly Rs 10 lakhs. Kindly suggest me best five ELSS funds that can deliver over 15-25 per cent return in three years. - Anand Ingle

In essence, tax-saving mutual funds are ELSS that provide tax benefits to investors under Section 80C of the Income Tax Act, 1961, and invest at least 80 per cent of the assets in stocks. The lock-in period instils in investors a positive habit of looking to make long-term investments.

Therefore, the finest ELSS funds that have given more than 20 per cent over the last three years are shown below:

HDFC Tax-Saver Direct Plan-Growth:
■ One-year return: 10.19 per cent
■ Current NAV as on April 24: Rs 863.79
■ Fund size: Rs 9,814.85 crore
■ Expense ratio: 1.15 per cent
■ Three-year return: 29.11 per cent

Parag Parikh Tax-Saver Fund Direct-Growth:
■ One-year return: 10.05 per cent
■ Current NAV as on April 24: Rs 21.25
■ Fund size: Rs 1,356.09 crore
■ Expense ratio: 0.78 per cent
■ Three-year return: 33.90 per cent

SBI Long-Term Equity Fund Direct Plan-Growth
■ One-year return: 9.35 per cent
■ Current NAV as on April 24: Rs 254.45
■ Fund size: Rs 12,335.61 crore
■ Expense ratio: 1.07 per cent
■ Three-year return: 28.96 per cent

Motilal Oswal Long-Term Equity Fund Direct-Growth
■ One-year return: 8.83 per cent
■ Current NAV as on April 24: Rs 30.37
■ Fund size: Rs 2,190.84 crore
■ Expense ratio: 0.79 per cent
■ Three-year return: 26.15 per cent

Kotak Tax-Saver Fund Direct-Growth
■ One-year return: 6.70 per cent
■ Current NAV as on April 24: Rs 85.95
■ Fund size: Rs 3,400.35 crore
■ Expense ratio: 0.69 per cent
■ Three-year return: 28.59 per cent

I want to invest in mutual funds, but not sure where to start. Could you explain what factors I should consider while choosing a mutual fund to invest in? - Ketan Joshi 

First of all, congratulations on starting your mutual fund journey. As you may be aware, investing in mutual funds has numerous advantages, including professional management by a full-time expert, risk diversification, affordability, liquidity, regulatory backing and tax benefits. Choosing the best mutual fund might be challenging given the wide range of options available. Over the long and short terms, several funds and fund managers generate substantial returns, but choosing the correct investment is crucial.

An investor should keep an eye on the following factors to select a mutual fund or assess the performance of a mutual fund:

The reputation of the fund house and fund manager — An investor should examine the previous record of the fund house and fund manager as the effectiveness of the performance of the fund manager can make or even break your investment. An investor should check whether the fund manager keeps a record of his prior investors’ buying & selling, find out new opportunities, and handle portfolios in various kinds of market cycles, or not. 

Assets under management — An asset under management (AUM) is the total market value of all the assets or funds such as cash, bonds, equities, and real estate that a mutual fund house manages at a given point in time. AUM includes returns as well as initial capital that a fund manager has to invest. It is an indicator of the size and success of a fund house. Large-cap and mid-cap funds may handle a large AUM. On the contrary, small-cap funds desire a low AUM.

Portfolio turnover ratio — In simple words, it is a measure that states how frequently assets are bought and sold by the fund managers. It is calculated by taking the total amount of newly-bought securities or securities sold (whichever is low) over a specific period, divided by the total net asset value of the fund. Actively managed funds have a higher turnover ratio as the fund manager is not required to be dependent on the investor’s decision. A ratio between 20-30 per cent is considered to be lower, whereas more than 50 per cent is said to be a higher turnover ratio. Index funds and ETFs have low turnover ratios.

Expense ratio — Buyers of mutual funds must know what amount they are paying for managing their funds. It is the total percentage of funds used as operating expenses such as administrative, advertising, and others. An expense ratio of one per cent means each year, one per cent of the fund’s total assets are used to cover these expenses. Expense ratios have declined over the last few years, but it is advisable to select a fund house that will charge less in terms of expense ratio.

Exit load — Exit load is a fee charged by the mutual fund house to allow an investor to exit a scheme partially or fully within a specific period from the date of investment, whereas, an open-end scheme can be redeemed at any point in time. Currently, many fund houses charge exit load between 1-2 per cent. 

The above parameters can help you in selecting and evaluating the mutual fund, in which, you wish to invest your funds. Once you have selected the best suitable fund for you, you must track its performance regularly to protect and strengthen your fund. 

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