Best Mutual funds are one of the best investment options for wealth creation in India. But, the biggest pain is to search out out best performing mutual funds that may help you in fulfilling your financial goals. There are thousand numbers of mutual funds schemes available within the market, that makes investor confused about which mutual fund they should select for investment. So, if you’re a confused investor and searching for the nice mutual fund for the investments you’re at right place.
Parameters to Choose Best Mutual Fund Scheme
I have followed methodology given below to identify best mutual funds.
Historical Return – I have short- listed these mutual funds based on historical performance. Last 5-year return is considered in order to decide best performing fund. This return is compared with peer funds in the same category.
- SIP Returns: Number of times returns from the mutual fund exceeds returns from the index.
- Lump-Sum Returns: Number of times returns from the mutual fund exceeds returns from the index.
Age of Fund House and Credibility – Another important selection factor is the age of fund house and credibility. I have considered mutual funds from oldest fund house with good credibility.
Risk Factor – Higher the risk, higher the return considering this philosophy in mind I have selected mutual fund High and Moderate Risk factor.
- Standard Deviation measures the deviation of the mutual fund return from the average. Lower the deviation; lower the volatility, which is good.
- Sharpe Ratio calculates the average of the return of the fund over and above the risk free return and standard deviation of the excess return. Higher the Sharpe ratio, better the performance of the fund.
- Sortino Ratio works similar to sharpe ratio but sortino ratio takes into account only the negative returns of the fund over and above the risk free return. Higher the Sortino Ratio, better the performance of the fund.
- Beta is the measurement of volatility of the fund from its benchmark index. A beta of 1 implies that fund movement is symmetry with the index movement. Lower the Beta, lower the risk which is good for fund.
- Alpha measures the ability of the fund manager in generating positive return wrt to risk free returns and index return. Higher the alpha, better the risk taking ability of the fund manager.
- R-Squared measures the correlation of NAV with its benchmark index. Similar to Beta, 1 implies a perfect correlation.
Fund Manager – I have considered Fund Manager Expertise and experience for the selection of these mutual funds.
- Fund having Fund Manager associated with longer tenure is given preferences.
- Only top 15 recognized Fund Houses are considered while best selecting mutual fund scheme.
- I have checked investment portfolio of these funds.
- Last but not least I have also checked rating of this fund by CRISIL and Value Research.
- I have tried to identify mutual funds from all major categories like Large Cap, Small Cap Mid Cap, Balance, ELSS etc.
- All information given here are taken from Value Research and Money Control.
Best Mutual Funds SIP Investment in India
I have listed two mutual fund schemes under each category i.e. Large cap, Multi-Cap, Mid-Cap, Hybrid/Balanced Fund and ELSS/Tax-Savings Fund.
Large Cap Funds
Large Cap Funds simply means that funds that invest more than 75th of their fund in large market capitalization stocks. large cap funds provide stable and sustainable returns over a period of your time. the 2 top mutual funds to invest in 2016 are:
- Birla Sun Life Frontline Equity Fund
- Franklin India Bluechip Fund
Multi Cap Funds
Mutli Cap funds aims to minimize risk by investing their funds into large cap, mid cap as well as small cap stocks. they’re relatively less risky compared to a pure mid cap or a small cap fund and are suitable for not-so-aggressive investors. the two top mutual funds to invest in 2016 are:
- ICICI Prudential Value Discovery Fund
- Franklin India Prima Plus Fund
Mid Cap Funds
Mid cap funds target stocks with medium market capitalization. The returns provide by mid cap funds may surpass large cap funds as these funds possess high risk than large cap funds. the two top mutual funds to invest in 2016 are:
- SBI Magnum Global Fund
- Franklin India Prima Fund
Balanced Funds invests around 65th to 80th in equity securities and remaining 35th to 205% into debt securities. Thus, once the market booms exposure towards equity extended to the highest level to reap maximum profit and vice-versa. the two top mutual funds to invest in 2016 are:
- Tata Balanced Fund
- SBI Magnum Balanced Fund
ELSS/Tax Savings Fund
ELSS Funds comes with major benefit of tax rebate under section 80C. money invested in ELSS funds are eligible for deduction u/s 80C up to Rs.1,50,000 per financial year. the two top mutual funds to invest in 2016 are:
- ICICI Prudential Long Term Equity Fund (Tax Saving)
- Franklin India Taxshield Fund
Points to Consider before making Investment in Mutual Funds
- Before making any investment, you must be clear regarding time horizon expected return and investment objective. Build your mutual fund portfolio based on your financial goals.
- I have given some of the top performing best mutual funds here. it’s not necessary to invest in each category mutual funds to build your portfolio. choose only four to five mutual funds as per your investment goal.
- Always choose SIP route for investment rather than doing lump sum investment. Invest in mutual funds for the long term at least 5 years or above. If you’re a conservative investor you’ll start building your portfolio by investing in debt or balance funds.
- Please don’t invest in any mutual funds based on tips. carry out proper research before making an investment. Take advice from expert or Certified financial planner.
- Review and balance your mutual fund portfolio at regular interval. consider stp (Systematic Transfer Plan) for switching from one mutual fund to different.
- If your mutual fund portfolio is generating negative returns, don’t panic. Don’t redeem or Stop SIPs. Avoid taking any call based on short-term market movements. Continue your SIPs for the longer period.
- Invest in Growth based mutual funds over dividend based mutual funds. stay away from New Fund offers (NFOs).
- Please remember “Mutual Funds Investments are subject to market risks. Please read the offer document carefully before investing”.
You might have already invested in mutual funds. you will or might not find your funds in above Best performing mutual funds that doesn’t mean that your selection is wrong. remember that there are thousand number of mutual funds scheme and selection terminology selected by every individual is different.
Stay invested in your mutual funds and monitor performance of the funds closely.