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


  1. 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?

      1. 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.

      2. 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?

  2. 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 ?


    1. 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.

      1. 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.


        1. 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.

  3. 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?

    1. 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.

      1. 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 ? 

        1. 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

  4. 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?

    1. 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.

  5. 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?

    1. 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

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