Best Mutual Funds to Invest in 2024
A mutual fund is a popular investment option for individuals. In India, there are thousands of mutual funds in which an investor can invest. However, determining the top ten mutual funds or the best mutual fund is difficult. So, if you're looking for the best mutual fund, consider your risk tolerance and the time horizon of your goals. Your willingness and ability to take risks is reflected in your risk profile. As a result, a risk-taking individual may invest in high-risk funds that are not suitable for a risk-averse investor. Your goals' time horizon, or the period over which you intend to hold an investment for a specific purpose, also plays an essential factor. Investors can invest in high-risk funds for long-term objectives rather than short-term objectives.
What are the Best Mutual Funds?
Mutual funds are classified into several types based on their underlying assets, which can include equity, debt, or gold. This classification gives rise to various mutual fund categories, such as equity mutual funds, debt mutual funds, and hybrid funds. Each category has its own risk profile and investment goal.
As a result, no single mutual fund is appropriate for every investor. Individuals' best mutual fund/s will be determined by their investment objectives, risk tolerance, and investment horizon. For example, if a person wants to invest in their child's higher education 15 years in the future, equity mutual funds may be the best option because they are better suited for long-term investments.
However, within equity mutual funds, there are sub-categories such as large-cap funds, mid-cap funds, and small-cap funds, and an investor can choose which one to invest in based on their risk tolerance.
How to Select the Best Mutual Funds?
There are no "best" mutual fund schemes because each individual's needs are unique. A scheme that is successful for one investor may not be successful for another.
Consider a service-class investor who is about to retire. Such an investor will almost certainly prefer to invest in a scheme that promises to protect his capital while also providing him with much-needed returns. A younger professional, on the other hand, will have more time on his side, allowing him to be more daring in his investment strategy and seek higher returns.
Prioritization is the most effective way to begin shortlisting mutual funds for investment. Among other things, one must clarify their investment goal, the amount they need to set aside for this goal, and the length of time they can stay invested. These factors must be communicated to the professional assisting the investor in shortlisting a mutual fund scheme so that the latter can outline a suitable investment strategy.
How Tax is Applied on Mutual Funds in India
Mutual funds can generate income in two ways: capital gains and dividends. Dividends are taxed according to your income tax bracket, whereas capital gains tax is determined by the type of fund and investment period.
At least 65% of the assets in equity funds are invested in equities and equity-related instruments. If you sell your equity mutual fund units within a year, the gains are taxed at 15% as Short Term Capital Gains (STCG). If you sell after a year, the gains are Long Term Capital Gains (LTCG), and gains in excess of Rs. 1 lakh are taxed at a rate of 10%.
For non-equity funds like debt or gold funds, gains from selling your units before three years are Short Term Capital Gains and are added to your total income, taxed as per your income tax slab. If you stay invested for over three years, they are Long Term Capital Gains and are taxed at 20% with indexation.
The capital gains taxation of hybrid funds is determined by their underlying asset allocation. If the portfolio contains more than 65% equities, it will be taxed similarly to an equity fund. It will be taxed as a debt fund if it has less than a 65% allocation to equities.
Who Should Invest in Best Mutual Funds?
Mutual funds that consistently provide high returns across market cycles are considered the best-performing mutual funds in India because they have demonstrated the potential to earn higher returns.
Achievement of financial goals: Investors who want to achieve their investment objectives should invest in top mutual funds that meet their requirements. Investing in top mutual funds that have consistently outperformed their peers in terms of returns will help investors reach their objectives faster.
People who want to invest on a regular basis: SIP allows you to invest in top mutual funds on a regular basis, such as monthly, weekly, or quarterly. You can achieve your investment goals by investing in the best SIP mutual fund. You can begin investing in mutual funds through SIP with as little as Rs.100 per month in any of India's best SIP plans.
Better returns than traditional savings options: Traditional savings options provide a fixed interest rate. However, because it is almost risk-free, the returns on these savings options are also low. Mutual funds, on the other hand, cannot guarantee returns. It can, however, generate higher returns than traditional saving options such as bank fixed deposits.
Furthermore, the risk-return profiles of various types of mutual funds differ. So, if you want to invest in high-yielding mutual funds, you may have to be willing to take on more risk.
Professional money management: Fund managers are individuals who manage mutual funds. Their job is to pick the best stocks or debt instruments to help the fund generate high returns and meet its goals. Individuals seeking expert fund management can therefore invest in these top mutual funds.
Diversification: Depending on the type of fund, the best-performing mutual funds invest in a basket of securities that aid in diversification, regardless of the amount invested. Diversification reduces the negative impact on the overall portfolio of a single (or a few) investment security's poor performances.
It assists investors in achieving consistent investment returns and smoother portfolio performance. As a result, investors can expect to earn higher average returns.
Do you want to invest in good mutual funds? The best mutual fund to invest in now will be determined by your financial goals, risk tolerance, and investment duration.