Best Mutual Fund Schemes for new investors

Best Mutual Fund Schemes for new investorsBest 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. 


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 Rs 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

Suresh KP


  • Bala

    Hi Suresh, for NRIs which MF will be good currently considering UK now not part of European community


  • Pawan Kumar Pattnayak


    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. 

  • Deeps

    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!!! 

  • Zainul

    Good MFs for a starter

  • bemoneyaware

    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.

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