In this episode, we tell you about the five basic formats of equity mutual funds and one the best schemes you may choose to make your investments.
Moneycontrol PF Team
Investment through mutual funds is on the rise. The question is - Is it the right time for you to invest in mutual funds? Choosing the right mutual fund in one’s portfolio is not an easy task. In this episode of Managing Money with Moneycontrol, we tell you about the five basic formats of equity mutual funds and the best scheme suited for you. In the accompanying video, Manoj Nagpal, Consulting Editor and Founder, Outlook Asia Capital, shares actionable insights on various categories of equity mutual funds present in the market.
Large-cap funds are less risky equity mutual funds as they consist of stocks of blue-chip companies having large market capitalisation. However, the criteria for defining market capitalisation for a large-cap fund actually differ from one company to another. Though the returns may be on a lower side as compared to other equity mutual fund category the returns usually beat inflation when one invests money over a longer period of time. Hence, these funds should be a core part of one’s portfolio.
There are several mutual fund schemes available in the market, out of which the good ones are ICICI Prudential Blue-chip fund, SBI Blue-chip fund and Nifty ETF funds.
These funds give you a mix of all three funds - large-cap, mid-cap and small-cap. This fund are generally not dependent on the market capitalisation of a company, which helps the fund manager to take opportunities from the market volatility and switch investment around the several funds. The scope of diversifying the investment widens in multi-cap funds. This is the ideal way of spreading your investment across the various funds.
There are several mutual fund schemes available in the market, out of which the good ones are Motilal Multi-cap fund, HDFC Capital Builder Fund, DSP Opportunity Funds and Mirae India Equity Fund.
Mid/Small Cap Funds
Mid-cap or small-cap are highly volatile and provide high returns when invested for a longer period of time. However, it's the fund manager's stock-picking ability that is going to give you the performance and help you get good returns. This category of funds is highly risky in nature as the investment is made in small and emerging companies stocks which are growing in nature. These companies mostly have low market capitalization with having a vision of growth.
There are several mutual fund schemes available in the market, out of which the good ones are Franklin Prima Fund, HDFC Small Cap Fund and the L&T Emerging Business Fund.
Tax Savings Fund
These funds are categorised as equity-linked savings fund. These funds come up with a minimum lock-in period of three years and provide you with a tax benefit of up to Rs 1.5 lakh under section 80C of Income Tax Act. Lock-in period gives fund manager more flexibility in choosing their investments. Therefore, look for a fund which has a long-term perspective of making investments. Hence, these funds can be considered as one of the best funds which provide capital appreciation along with doing tax savings.
There are several mutual fund schemes available in the market, out of which the good ones are Motilal Long Term equity fund, IDFC Tax Advantage Ffund and ABSL Tax Relief-96 Fund.
Unlike sector funds, thematic funds are well-diversified funds. Whereas in sectoral funds, you can only invest in certain sectors which requires expertise before making any investment. The themes which are considerably going well these days are consumption theme and the infrastructure theme. While forming a theme, the fund manager makes the selection of companies from different sectors on the basis of a common theme.
There are several mutual fund schemes available in the market, out of which the good ones are ABSL GenNext fund, IDFC Infra Fund and Mirae Consumer Fund.(You can send in your queries to firstname.lastname@example.org) Not sure which mutual funds to buy? Download moneycontrol transact app to get personalised investment recommendations.