Investment In Mutual Funds: Top Mutual Funds to Invest
Investment in Mutual funds in India started in1963 when Unit Trust of India (UTI) was established by the Government. Until 1987, UTI was the only Mutual Funds recognized institution, and then came other Indian government regulated financial institutions with their mutual fund’s services.
Investment in Mutual Funds in India implies the acquisition of money in terms of bonds, financial institutions, short-term money market, stocks and securities and distribution of profits as dividends.
The management of mutual funds in the hands of money managers which are also called portfolio managers.
What are Mutual Funds?
The money-managing systems that are created to prudently see to the investment of money pooled from the public is referred to as Mutual Funds. An investment option that permits investors to access a diverse portfolio of bonds, equities and securities is called Mutual Fund.
The different types of Mutual fund schemes are managed by the Asset Management Companies (AMCs) which are coordinated by various financial companies.
Types of Mutual Funds in India
The major types or categories of mutual funds are:
Closed-end, open end, equity, mid cap, large cap, fund, growth, balanced, exchange-traded, load, no-load, international, money market and sector mutual funds.
Market Penetration of Mutual Funds in India
Reports have it that the level of patronage of investments in Mutual Funds in India is very low. Not more than 10% of India households are beneficiaries of mutual fund investments.
As at 2013, the number of mutual funds in India stood at 46; yet investors decline to release their money into the scheme due to their inadequate awareness on the market feasibility of Mutual Funds.
Majority of Indians consider Investment in Mutual funds to be of very high risk, while others have no idea on how to start the investment process.
The Mutual Fund Industry in India have consistently benefitted from the activity of outsourcing the servicing of investors to the two prominent Registrar and Transfer Agents (RTAs). The leading RTAs are CAMS and Karvy with a market index of 65% and 35% respectively.
Each of the RTAs have a network of local offices that allows the investors to carry out transactions with ease.
Other services offered at the local are nomination registration, financial transaction acceptance, transaction processing, non-financial changes, transmission of units and much more.
BENEFITS OF MUTUAL FUNDS
Professional management and research: mutual funds are managed by a qualified and experienced manager who monitors market trends regularly and researches on the viability of the investments.
Risk Diversification: because of the large portfolio available, the risk is reduced and the profits raised even with low investments.
Convenience: mutual funds comes little difficulties and easy to track. There’s convenience in the redemption process, access to account statement and availability of performance details updates in newspapers and journals.
Tax benefits: based on the recent financial act, dividends from mutual funds are not taxed on getting to the investors.
Liquidity: open-ended mutual funds offers huge advantages of investors redeeming on demand.
Reduced Cost: since Mutual Funds have a huge amount of money collected from the public for investments, the costs investment is less as a larger amount of securities can be bought.
Top Mutual Funds to Invest in India
|Mutual Funds Name||Mutual Funds Types||Date Established||NAV as at 2013|
|Mirae Asset Emerging Bluechip Fund||Regular (Growth)||9th July 2010||49.3340|
|Motilal Oswal Multicap 35 Fund||Regular (Growth)||28th April 2014||26.650|
|HDFC Mid-Cap Opportunities Fund||Regular (Growth)||57.124|
|ICICI Prudential Technology||Growth||54.920|
|SBI Banking and Financial Services Fund||Growth||26th February 2015||16.235|
|L&T Infrastructure Fund||Growth||27th September 2007||16.870|
|Franklin India Smaller Companies Fund||Growth||1st January 2006||59.349|
|SBI Bluechip Fund||Regular (Growth)||14th February 2006||38.599|
|Franklin India Focused Equity Fund||Growth||26th July 2007||38.585|
|Aditya Birla Sun Life Frontline Equity Fund||Growth||30th August 2002||218.330|
BENEFITS OF LARGE CAP MUTUAL FUND SCHEMES
The performance spans across a 3-year period which is decided by dividing into smaller periods. Each of this sub-periods are used to determine the consistent performance of the scheme.
The average rolling returns given by MF in a year is called the mean rolling return which allows investors to analyze the performance level of the funds within the given year.
In the analysis of a mutual fund, only the negative return is considered while determining its final performance.
Tax saving has been a major advantage of Mutual Funds as the Indian Income Tax Act allows an investor to claim refunds on the taxed income by injecting the funds into a mutual fund investment scheme.
EQUITY-LINKED SAVINGS SCHEME (ELSS)
Equity-Linked Savings Scheme (ELSS) is among the popular investments with tax-saving options which provides tax benefits and capital appreciation. ELSS investments is a widely appreciated form of investment in India.
OTHER INVESTMENT OPTIONS IN INDIA BESIDES MUTUAL FUNDS
- Public Provident Fund
- Direct Equity or Share Purchase
- Real Estate Investment
- Investment in Gold
- Post Office Saving Scheme
- Company Fixed Deposits
- Initial Public Offerings
- Unit Linked Insurance Plans
- Invest in Bonds
BASIC FEATURES OF ELSS
It is possible to begin your investment with an amount of money that is as low as Rs 500 and has no maximum amount that can be invested although investments that reaches Rs 100,000 and above will be acceptable for tax benefits.
It should be noted that ELSS offers a lock-in period of 3 years unlike other tax benefit schemes with a lock-in period of 6 to 15 years. Another benefit is that the funds in ELSS are open-ended with an option for around the year investment of the funds.
Availability of nomination facilities in event of the death of an investor and absence of exit or entry load charges is another important benefit of the scheme.
Investments in ELSS allows investors to create wealth by accepting the growth options through they can fulfill their life’s goals. After the funds had mature following the 3-year rule, it will be completely tax-free on withdrawal.
The decision to invest in ELSS Mutual Funds for a 5 to 7 years span is the best because of the compound interest that will accrue to the invested fund over the period.
THINGS TO KNOW WHILE INVESTING IN MUTUAL FUNDS
The following facts are worth having in mind before making the ultimate decision of putting your money into a Mutual Fund Scheme.
- It is important to acknowledge you short and long-term financial goals and then pick the suitable investment options available.
- There is no age limit to investments in mutual funds, this implies that any category of the citizens can apply.
- There are numerous categories of investment options for an investor can choose from. Rather than hold to one scheme, it is best to explore the many options.
- It is possible that an investor will panic at the sight of a downfall on his Mutual Fund dashboard. However, holding on to the long-term mutual fund plan is the best.
- Stick to the consistent performers outlined in the long-term reports and ignore the recent rating performance displayed.
- To crown, it all, have a realistic expectation which should be between 12% to 15% returns.
HOW TO KNOW THE BEST MUTUAL FUND IN INDIA
The Net Asset Value(NAV) of a Mutual Fund is the top determiner for any investor willing to invest his funds into the system. One needs to consider the best performing mutual funds in the market by tracking its NAV.
Net Asset Value is generally indicated in terms of shares per amount and marks the latest market value of the company holding the funds.
Most NAVs are decided on a daily basis and is determined after the end of the trading hours for the day. When the NAV increases, it signifies a rise in the funds of the shareholder. Note that the closed-end NAV of mutual funds are released on a weekly basis while open-end NAV is indicated daily.
LIST OF MUTUAL FUND COMPANIES IN INDIA
Some of the most top performing Mutual Fund companies in India are summarized below:
- Reliance Mutual Funds
- Canara Bank
- ABN Amro
- Birla Sun Life
- Bank of Baroda
- Kotak Mahindra
- Deutsche Bank
- JP Morgan
- DSP Merrill Lynch
- Escorts Mutual
- DBS Chola Mandalam AMC
- Morgan Stanley
- ICICI Prudential
- Taurus Mutual Funds
- Sahara Mutual Funds
- State Bank of India
- Lotus India
- Standard Chartered
- JM Financial
Mutual Fund Investments has been popularly acclaimed as one of the best investment options with potentials for wealth creation. You can earn high returns and yet equally free from paying taxes.
People from all walks of life can easily invest in Mutual Funds and the internet has made it easier by simplifying means of access to the trading platforms.
Availability of multiple Mutual Funds options in the Market has made it easier for investors to select their suitable plans and make extra earnings.
It is advisable to choose the best performing Mutual Funds which has been consistent in terms of performance in the market to avoid the risk of losing your investment.