Best Mutual Fund Schemes for new investors
While there are several mutual fund schemes, only few of them are performing well. While investors who are already aware on how stock markets, would be able to understand and pick-up some of the best mutual fund schemes. We are ranking best mutual fund on the basis of the risk profile, e. g. Aggressive, moderate and conservative investor. But, classifying a novice investor on the basis of risk profile is not justified. Which are the best mutual fund schemes for new investors? Which are the top mutual funds where a new investor can invest? Does mutual funds schemes for new investors would be different from a normal investor?
Also Read: Top Mutual Funds to invest to double your money in short term
What is the requirement of the new investor?
The new investor, who is taking the first step of mutual fund investment, requires extra attention irrespective of the risk taking ability. So let us first understand the requirement of a new investor.
New Investor n the market is like a kid in the world. She/he requires a motherly care. New investor wants the growth, but with utmost care. He/she does not like surprises and shocks.
These are the requirements of new investors.
Better Return
Why do we want to invest in mutual funds? Why do we try mutual funds over the fixed deposit, post office saving scheme? The only reason is the rate of return. We go to mutual funds in search of the better return. To achieve the goals of happy retirement, child education and child wedding we need a big corpus. The bank FD and NSC would not give enough return to accumulate the desired corpus. Consequently, we look towards the mutual fund. The mutual funds are the ray of hope for new investors. These should give more return than bank FD.
Tax Saving
Another reason to mutual fund investment is the tax saving. The new investor gets to know that ELSS mutual funds can save tax. Thus, they want to enjoy this tax benefit as well.
Stability
The new mutual fund investor may not be fully aware of the risk associated with it. A mutual fund investment can become a roller coaster ride in the dark for the new investor. It is not for the faint-hearted. But we don’t know about the mental strength of the new investor. Thus, the mutual fund investment for the new investor should have less twist and turns. The chosen mutual fund scheme should be less volatile.
Less Risk
A typical new investor is not a long term investor. The veterans use the long-term investment strategy, the new investor is a cautious person. A typical new investor would like to judge its decision after 2-3 years. He/she wants a good return to justify this new investment. So, the mutual fund selected for the new investor should carry less risk. It should have a better chance of the positive return. No new investor wants a bitter experience in his first mutual fund investment.
Suitable Funds for New Investor
By going through the requirements of the new investor, following category of the fund should be suitable.
Balanced Fund
These funds invest in the shares as well as in the fixed-income investments such as bonds. Because of this mix, the balanced funds are not as much volatile as the average equity mutual fund.
Blue-chip Fund/ Large cap Fund
The blue chip funds invest in larger companies. The earning of these companies is more stable than medium and small companies. Therefore, the share prices of big companies do not fall more in adverse market situations.
Equity Linked Saving Schemes
The ELSS are the tax saving mutual funds. By investing in ELSS you can save tax up to ₹ 46,000/year. The tax benefit of ELSS comes under the section 80C of the income tax act. The ELSS can be also a good choice for the new investors as it can save a big amount.
Fund Selection Process
To select the best mutual fund for new investor, I have gone through these steps.
- I decided to select 2 mutual funds from the above categories.
- I picked those funds which gave more than 12% return during last 3 years. 12% is a good return for the new investor. It is better than other Fixed-rate investments.
- I have sorted the funds on the basis of low risk and low volatility.
- Again, I picked up those mutual funds which have given best returns.
Best Mutual Fund Schemes for new investors
1. HDFC Balanced Fund
It is an equity-oriented balanced mutual fund. The fund was launched in Year 2000. It invests 70-72% fund into the shares.
- It has given 16.55% annualised return since inception. In the last 3 years, It has given 22% annualised return. The return is about 4.5% more than the category average.
- In the last one year, it has given 6.44% return. It takes below average risk. Thus, it is a suitable mutual fund for the new investor.
2. L&T Prudence Fund
It is an equity-oriented balanced mutual fund. The fund was launched in 2011.
- The fund has given 13.75% annualised return since inception. It has given 21.12% annualised return in the last 3 years.
- In the last one year, it has given 6.45% return. The L&T Prudence Fund also takes below average risk.
3. SBI Bluechip Fund
It is a large cap fund. It primarily invests in big companies. The fund was launched in 2006.
- It has given 11% annualised return since inception. Last 3 years has been quite good for the fund. It has given about 22% annualised return during this period.
- In the last one year, It has given 8.29% return. The best thing about this fund is a low risk.
4. Birla Sun life Top 100 fund
This large cap fund was launched in 2005.
- Since inception, it has given 14.85% annualised return. The last 3 years has been very good for the fund. It has given 20.7% annualised return during this period.
- The return during last one year has been 5%. The fund takes below average risk.
5. Axis Long Term Equity fund
It is a tax saving ELSS mutual fund. The Axis long term equity fund has proved itself the dark horse. Despite taking a low risk, the fund has given an outstanding return.
- Since its inception in 2009, It has given 19% annualised return.
- In the last 3 years, the fund has given 27.64% annualised return. It is 6% more than the category average. The return during last one year has been 4.4%.
6. Birla Sun Life Tax Relief 96
It is one of the oldest tax saving mutual fund. The fund was launched in 1996.
- Till date it has given 26% annual return. In the last 3 years, the fund has given 25% Annualised return.
- The return during last 1 year has been 6.5%.
- The fund is recommended for the new investor as it takes below average risk.
Also Read: Amazing Mutual Funds that gave highest returns in last 10 years
The above list of the mutual fund is picked for the new investor. The list can be slightly different for those who are experienced. I did not take account of debt or debt oriented fund as their return is almost similar to the bank FD and NSC. However, debt funds are the safest mutual fund.
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This is the guest post from Chandrakant Mishra of PlanMoneyTax who provides expert advice on various investment ideas. He can be reached at planmoneytax@gmail.com.
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Thanks for sharing this valuable information on best mutual fund schemes. Very useful for beginners like me.
Axis long term equity is best in my opinion.
Hi sir my age is 30 year old,now I want to start invest for my future,and for retirement.I have zero knowledge of mutual funds and market.through ur ideas and suggestions,
I want invest ,plz guide me .
Thanks
Hi sir my age is 35 year old,now I want to start invest for my for my children future,and for retirement.I have zero knowledge of mutual funds and market.through ur ideas and suggestions,
I want invest ,plz guide me where to I start. Thanks u sir
Hi Suresh,
I am a big fan of your blog and have been following you since a tear now. I am relatively new to investing and last year I started investing in SIP, mainly Debt Funds. I have been investing about Rs. 3000 per month in 7 Debt Funds. Now I have realised, based on my research and basis your articles, that I should diversify my portfolio as my goal is primarily for retirement which should be aprox 30 years from now.
Following is the list of funds that I have identified, where I wish to invest:
Largecap
ICICI Pru Top 100 Fund
Largecap
Birla SL Frontline Equity Fund
Mid/Small cap
DSP Blackrock Micro Cap Fund
Mid/Small cap
Franklin India Smaller Companies Fund
Diversified
Quantum Long Term Equity Fund
Diversified
Principal Emerging Blue-chip Fund
Balanced
HDFC Balanced Fund
Debt – Gilt – Medium/ Long Term
HDFC Guilt Fund – Investment Plan
Debt – Gilt – Medium/ Long Term
SBI Magnum Gilt Fund – Long Term Plan
Debt – Gilt – Medium/ Long Term
Tata Gilt Mid Term Plan
ELSS
Axis Long Term Equity Fund
Can you suggest if I need to edit these in anyway?
Regards Oz
These are good funds, stay invested
i am going to retire from service in Jan 2017, but my daughter age is only 10 years as she is my late issue due to problem of my wife.I had to incur lot of expenses for it. Now i want to long term SIP in Mutual fund for her .please suggest me in which funds I have to invest. I can invest Rs.10000/- per month.
hi i am a new investor into the field of mutual fund. i have invested in these below funds
1.hdfc arbitrage fund -1000 monthly SIP
hdfc balanced fund -1000 monthly sip
time frame 3 years
pls rate the investments and advice another 2 funds of 1000 each.
I am new kids in investment world of sips. I want know how to start a investment in sip and what is it? I want to 2000 per months investment. Please Help me
What are the risks and returns associated with peer to peer lending?
Dear Suresh,
I am investing in
1.DSP Blackrock Microcap fund -2K Per month.
2.SBI magnum midcap fund -2K per month.
and I am inerested to invest Lumpsum 1 Lac please suggest some good funds ino rder to get good returns.
Now the market is high is it right time to invest ?
or wait some time …
can y
Pavan, Good funds. Currently markets are in peak, hence not advisable to invest lumpsum. You can invest in debt funds and do STP for 10-12 months and invest thru SIP
Dear Mr.Suresh,
I heard about you thru one of my friend and he is the regular reader of your blog.
I need some financial planning / ideas / suggestions to get rid out of my debts & also for the present & future needs.
Can you please help me in this regard?
Hi Arjun, You can post your details here without contact nos. I can provide guidance. This way it would be useful for others too.
Dear Mr.Suresh,
Thank you for your immediate reply.
Myself Arun age of 37 years. Unmarried.
I am having debts of nearly 35 Lakhs, due to some loss in business. To cover these debts, i raised some funds thru loans in my close Friends & well wishers name. I am paying EMI of Rs.10,000 for Rs.10 Lakhs, Rs.2900 for Rs.1 Lakh & Rs.1700 for Rs.40,000 as monthly commitments. Apart from these having personal finance also with & without interest. My income is around Rs.35,000/- per month.
I need your valuable financial planning & ideas in this regard. Kindly revert.
Once again Thank you.
Dear Mr.Suresh,
Hope my content reached your end.
I am expecting your guidance in this regard.
Thank you.
Arunjunai.
Dear Mr.Suresh,
I have inquired regarding my financial problems and requested your suggestions.
I posted the same but i didn’t received any reply from your end.
Also, i don’t know my post reached your side.
Kindly let me know the way to reach you.
Thanks.
-arunjunai-
Hi Arun, I try to answer most of the times, but few times, i would miss too. Pls post your query, i would be glad to answer.
Dear Suresh,
Thanks for posting your investment ideas and certainly these are helpful to us. You mentioned above to invest in 5-8 Mutual funds scheme for achieving financial goals. However will the underlying stocks of most funds not overlap, if we choose in similar type of funds? So, I think we need to diversify across categories, right?
I am doing SIP in the below funds and want you to review these MF Growth funds and suggest, whether to continue SIP in these or stop and invest in other better funds. I am 45 years old and want to save for my retirement.
1) Quantum Long Term Equity- Rs. 5000/-
2) Franklin Smaller Companies- Rs. 2000/-
3) Canara Robeco Emerging Equities- Rs. 1000/-
4) SBI Blue Chip- Rs. 1000/-
5) HDFC Balanced- Rs. 1000/-
I also want to invest additional 5000/- or so and according to you in which funds should I distribute?
Good funds Rajesh. Yes, you need to diversify across categories. You can add Birla SL Frontline, HDFC midcap opps and ICICI balanced funds
Thanks Suresh. Do you suggest going for another 3 different funds or topping up additional Rs. 5000/- in already SIP’s I am having. As I have midcap, balanced and Large Cap categories and most of the stocks of mutual funds you suggested might be matching with those in existing mutual fund categories I am having SIP in.
Thanks Suresh. As I want to invest additional Rs. 5000/- is it not better to increase my SIP amount in the existing funds rather than adding additional new funds. I am already having midcap, large cap and balanced fund mix in the existing portfolio…What do you think?
Yes Rajesh. You can go ahead and invest in exisitng funds as your portfolio is already diversified
Dear Suresh,
Currently i have following portfolio which i have selected based on returns and investing from past 6 months.
1) DSP blackrock micro cap – 2000/-
2) Reliance small cap -1000/-
3) Franklin Small companies – 1000/-
4) SBI Blue Chip – 1500/-
5) SBI Mid cap Fund- 1500/-
I am looking for time period of around 4-5 years for good and consistent returns.
Need your view on my current running portfolio? All funds are performing good so far? Do you think there is need of diversification? Please suggest with some MF examples if you think need to diversify is there ?
Thanks
Mohit, funds selected by you are good. However don’t expect good returns in just 4-5 years. You should be willing to invest for 8-10 years.
Thanks Suresh,
Should I diversify it to minimize risk in catastrophic times like you generally suggest to invest in large cap or may be diversified funds. Currently i am holding 70% investment in Small/mid cap funds ?
I have no issues in keeping funds for 7-8 years as well.
Thanks
I feel one should keep mutual fund investment in the range of largecap-40%, mid-cap-30%, balanced funds 30% and debt funds 10%. This way you are balancing.
Hi
I have a question. We genereally see people suggesting to invest for long term (say 10-12 years) in Mutual fund to expect high return.
I have a question here:
Suppose I invested in a 3 SIP-based Mutual funds (5000 each) and I saw 1 mutual fund is under performing from past 1 year. What should be strategy in such case?
I surely would want to come out of that mutual fund as I cannot see consistent loss of my money. In such a case how can I remain invested for long term if one of the choice went bad?
First, pick-up highly rated / top rated funds. If your decision still went wrong, you should check the performance for atleast 1-2 yeas before taking decision. If you still feel it is underperformer, you should exit. Hence I always suggest investors to invest in 5-8 mutual fund schemes. Even if 1-2 are not performing well, other 80% would achieve your financial goals.
Thanks Suresh. I got your point. I want to ask by giving an example. I opted HDFC tax saver(D) which was over performing 5 years ago. I invested in it for 3 years and today it is highly average/underperforming fund.
What would you suggest to me in such a case. My actual question is relates to remain invested in MF schemes for long term. So, in my case Shall I take out the money and re-invest in lumpson in some good performing fund. Does it work that way ?
Your question has two parts. HDFC Tax saver fund was a good fund. Currently it is average, howeve pls have patience and continue investing in it. If you are willing to take out that money, don’t invest lump sum now, you can scatter and invest every month for next 10-12 months
Dear Mr. Suresh,
I am planning to start investing in following mutual funds for 7 to 10 yrs. 1) Franklin Smaller Companies Fund 2) DSP BR Microcap Fund 3) ICICI Value Discovery Fund 4) Franklin High Growth Companies Fund, can you please suggest me whether these funds are good or not?
All are high risk since they are in mid small cap space. The last 2 funds are in multicap You can invest in all 4 in equal amounts but you should also consider diversifying to blue chips.
When markets bleed these funds could wipe off 50% of your NAV.
I am getting retired in 8-10 months. Have INR 80 lakhs savings; all in FD for 1 year & 2 year periods, with State bank. How can I earn 1 lakh every month and keep the principal amount safe?
Dear Sir,
My name is Pavan I am intersted to invest 10000 per month in SIP for long term.
Can you suggest me some good MF.
My age is 28 years
Hi Pavan, You can invest in the funds indicated in this article
Hi Suresh, for NRIs which MF will be good currently considering UK now not part of European community
Sir,
I have started investing in Birla Sun life Tax Relief 96 (1000 per month) and in UTI MNC Fund (1000 per month) from April 2016. Should I continue in the schemes or should I choose other MF ?? I am planning to invest additional 2000 from Septermber 2016. What are the best MFs in which I can invest?? The MFs should give avarage 20% return in 10-20 years.
Hi Suresh,
Could you please suggest good short term debt funds to park remaining emergency fund after keeping some amount in Savings account? I keep aside some small amount every month in savings account as an emergency fund. Now amount is around 75K in S/A. I want to start short term MF so that i can transfer this amount every month to this fund and if required in case of emergency i can withdraw it within 1-2 days as I have already kept some amount in Savings account. Please suggest some good short term mutual funds for new investor like me. Thanks!!!
Deepali, You can invest in short term debt funds like reliance short term fund, SBI Short term fund and Tata short term fund
Thank you Suresh Sir!!
Good MFs for a starter
Good article ..very helpful for newbies..
How would suggest a new investor to choose? A balanced fund or large cap or ELSS?
A table with all funds..would be helpful
Hi, If one is looking for tax saving,he can consider ELSS funds, else a new investor can just go for combination of large cap and balanced funds.