Best funds recommended across each category, based on our quantitative & qualitative research. The quantitative and qualitative research is based on the underlying stock picks by a qualified fund manager and the performance returns indicative of the market returns.
Large-cap funds invest a larger percentage of their corpus in companies with huge market capitalization. These funds provide stable and consistent returns over a period of time.
Mid-cap funds are those funds that exist between large-caps and small caps with respect to their company size. These funds outperform during bull phase of the market as the companies look for expansion by looking out for appropriate growth opportunities. These stocks are more volatile, however, suitable for those investors with higher risk tolerance. Investing in mid-cap funds provide higher capital appreciation with a reasonable higher level of risk.
Multi cap funds invest in stocks across market capitalization and sectors i.e. their portfolio possess the traits of large cap, mid cap, and small cap stocks. They have the flexibility to accommodate their portfolios according to the market cycle and not restrictive to any particular segment of the market. They have the potential to go anywhere and provide long-term capital appreciation. Multi cap funds are less risky, however, suitable for not-so-aggressive investors.
Small caps have the highest growth potential, since the underlying companies are young and look to expand aggressively. They are more prone to a business or economic downturn which makes them more volatile than large and mid-caps. Investors looking to invest in the small-cap space may not have the time to research but have the higher risk tolerance for investing in such funds.
International Funds are those funds which invest in companies located outside of its investor's country of residence. These funds primarily invest in equity but with less exposure to country-specific risks. The additional risks the international funds may encounter are currency fluctuations, political uncertainty but diversifying internationally can help offset the complete volatility of the portfolio.
These funds invest in specific sectors like IT, infrastructure, pharmaceuticals, etc. or capital market segments like large caps, mid caps, etc. This scheme offers relatively high-risk return opportunities within the equity framework.
This scheme provides tax advantages to its investors. These funds are eligible to income tax exemptions under Section-80 C of the Income Tax Act, 1961 with a 3-year lock-in period. The taxes are saved under Equity Linked Savings Scheme(ELSS) which provide long-term growth opportunities.
Liquid funds ensure a high level of income available from short-term investments consistent with moderate levels of risk along with preservation of capital. Investment in liquid funds is made in a portfolio of money market and investment grade debt securities.
Ultra Short term
Ultra short-term funds invest in fixed income instruments which are highly liquid and have short-term maturities. These funds help investors avoid interest rate risks, although they are riskier offer better returns as compared to money market instruments.
Short-term funds offer quick gains and consistent flow of income without bothering about daily movements in the bond markets. These funds are suitable for low-risk appetite investors which help them to steer clear from rising inflation. These funds are highly liquid offering investors easy access to cash.
Dynamic Bond Fund
Dynamic bond funds are meant for generating optimal returns through active management by capturing positive price and credit spread movements. These funds are ideal for those investors who don't have the understanding to take a call on interest movements. The income derived from such funds seek capital growth over short term. Investments in dynamic bond funds are made in an actively managed portfolio of high quality debt and money market instruments including government securities.
Credit opportunities funds are those mutual funds which generate income by investing in debt and money market instruments across the credit spectrum(irrespective of the credit rating). In other words, these funds invest in low rated debt instruments typically below “AA” rated credit category. These funds are designed to provide high liquidity as the low credit rated instruments offer high returns and they are considered as high risk investments.
Monthly Income Plans or MIP mutual funds are debt funds which invest 5% to 30% in equity and balance in debt related instruments. These MIP plans offer regular dividend payouts either by monthly, quarterly or half-yearly.
Gilt Funds(Short Term, Mid Term, Long Term)
These funds as the name suggests, invest in government securities. Generally, preferred by risk-averse and conservative investors which look to safeguard their investments by employing their funds under the protection of government bonds.
These funds invest in a pre-specified maturity period. These schemes usually comprise of debt securities which have a maturity period comparative to the maturity of the scheme, which as a result, earn through the interest component(known as coupons) of the securities in the portfolio. FMPs are generally passive managed i.e. no engagement of active trading of debt securities in the portfolio. The expenses are applicable on the scheme, are hence, relatively lower than actively managed schemes.
These funds invest in the shares of gold mining and production companies.
Equity oriented hybrid schemes invest in a mixed combination of equity(at least 65%) and debt. These funds are less volatile because of their mixed portfolio but at the times of volatility debt component provides enough stability. These funds are appropriate for novices in the stock markets and for very conservative equity investors.
Hybrid debt oriented mutual funds are meant to invest between 75% and 90% in debt instruments and the remaining in the equity market. Such funds are appropriate for aggressive investors and known by different names such as monthly income plans, income savings funds, conservative asset allocation funds, and others.
Asset allocation funds are also known as hybrid funds, target-date funds, or balanced funds, usually comprised of a portfolio made up of a mix of stocks, bonds, and cash. These funds are classified into domestic or international hybrid categories. These funds can be more aggressive(higher equity component) or conservative(higher-fixed income component) based on the fund's prospectus. Asset allocation funds are based on the concept of risk diversification. The investments in financial instruments are suggested based on the risk appetite of the investors.
Arbitrage funds invest in equity, equity derivative, and debt instruments. It is designed to tap the price differential in cash and derivatives market to augment returns. The returns are dependent on the asset volatility conditions. These funds often invest a substantial portion of the portfolio in debt markets.