Mon. Jun 17th, 2024

A mutual fund is a sort of investment vehicle in which the funds of many participants are pooled together to form an investment product. The fund then concentrates on how to use those assets to invest in a group of assets to meet the fund’s investment objectives.

Investing in mutual funds is less risky than picking individual equities. Picking the best mutual fund might be easier than anything. You can start by identifying your goals and risk tolerance. Are you looking for capital gains or current income? Also, consider if you will be able to maintain current dramatic portfolio swings and for long you can afford to tie up your money. Defining your goals can help you to select among approximately 8000 mutual funds to your basket that suit your needs. Investors looking to address long-term needs and who are willing to assume a fair amount of risk may prefer a long-term capital appreciation fund. This typically holds many assets and common stocks so there will be potential for large rewards. Investors who want current income should look into a fund that holds government and corporate debt. Balanced funds with both stocks and bonds are better for investors for longer-term needs but an aversion to substantial risk.

How do you choose the best mutual funds in India?

The following are some criteria to consider when selecting the best mutual fund via investment apps India based on your financial goals, risk tolerance, and asset allocation –

  • Identifying goals and risk tolerance: Before investing in any fund, you must first determine your investment objectives. Is long-term capital gain your goal, or is current income more important? Will the funds be utilized to pay for education or to save for a long-term retirement? Choosing a goal is the first step in narrowing down the universe of over 8,000 mutual funds offered to investors. You should also think about your risk tolerance if you can tolerate large fluctuations in portfolio value. Is a more conservative investment better suited? Because risk and return are inversely proportional, you must balance your desire for rewards with your willingness to tolerate risk.
  • Time Horizon: Consider the intended time horizon. How long do you intend to keep the investment? Do you foresee any liquidity issues soon? Mutual funds contain sales costs, which can eat into your return in the near run. A five-year investment horizon is ideal for reducing the impact of these expenditures.
  • Risk Appetite: If you understand your risk tolerance, you will simply be able to select the appropriate mutual fund! To ensure that you are assuming the appropriate level of risk, you should be aware of a scheme’s risk profile. Equity funds are appropriate for investors with moderately high to high-risk appetites, whereas bond or debt funds are appropriate for investors with low to moderate risk appetites.
  • Taxation: Taxation is one of the most significant elements to consider when determining how to select the best mutual fund since you must understand the tax implications of your investments before you begin. Short-term capital gains (kept for less than 12 months) in equities funds, for example, are taxed at 15%, while long-term capital gains (held for more than 12 months) are tax-free up to Rs 1 lakh and taxed at 10% afterward (over Rs 1 lakh of capital gains). Short-term capital gains in non-equity funds are taxed at your marginal tax rate, whereas long-term capital gains (held for longer than 36 months) are taxed at 20% after indexation.
  • Asset Allocation: Varying asset classes have different risk profiles, for example, debt funds are often less risky than equity funds. You should recognize that risk and reward are inextricably linked. The goal of asset allocation is to meet your financial goals by balancing risk and return. If you have a higher risk tolerance, you may allocate more to stocks and vice versa. You should invest in the proper asset class depending on your financial objectives and risk tolerance, and to do so, you must learn how to choose the right mutual fund.


To conclude, this is how you can make the process of selecting a mutual fund easier. Many investment apps in India make it easy for you by providing all the information in a single platform. You can analyse the funds using widgets and features available on these apps. Remember to be truthful to yourself when answering the above-mentioned questions. When you understand the purpose and aim of your investment, you will be able to make better decisions.

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