Many new mutual fund investors are not clear about the kind of schemes they should be choosing and rely on the internet to give them the choice of the top mutual funds to invest. However, these searches are confusing and end up complicating the investor’s journey further. To clear this issue, we have charted down a few pointers which will help you decide on choosing the right mutual funds. The foremost thing that you should do is find out about each category, whether it suits your investment objective and risk profile. For those who have just entered the investment space, aggressive hybrid schemes are best suited as these invest majorly in equity (about 65-80%) and debt (about 20-35%). Owing to its hybrid portfolio, the volatility factor is lessened as compared to pure equity schemes and hence can be considered as the best option for conservative investors wanting to create long term wealth without the risk of high volatility.
Large cap mutual fund schemes are meant for those who are willing to invest for the long term. These schemes invest in the top 100 stocks and are comparatively safer than other equity mutual fund schemes. As they are less volatile in nature as compared to mid-cap and small cap schemes, they can be an ideal choice for those looking for good returns while taking less risk than small cap funds. Aggressive investors looking for extra returns by taking risk can place their bets 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 capitalization. Although these schemes are extremely volatile, they can offer better returns if the investment is locked for a longer period. If you have a long-term investment horizon and an appetite for higher risk, you can opt for these schemes.
There are diverse mutual funds in India which one can choose according to their investment and risk capacity. The bottom line is that you should always choose a scheme that matches your investment objective, horizon, and risk profile. If you fail to understand the basic concepts of mutual fund investments or are totally new to mutual funds and investing, you should always seek the help of an experienced mutual fund advisor before starting your investment journey.