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Friday, 9 July 2021

Top 10 high return paying mutual funds in India

Top 10 high return paying mutual funds in India

A mutual fund is a trust handled by the fund manager that pools the savings of thousands of investors who share the same financial goals. The money collected is then invested in capital market instruments such as stocks or bonds, or a combination of the two.

Investing in mutual funds is done through the provision of different types of investing options that are made available to the investors. These falls\ broadly into the following categories: SIP (Systematic Investment Plan), onetime payment, yearly, half yearly and quarterly payments. SIP was essentially introduced to average out the cost of investment by purchasing a particular amount of units at regular intervals irrespective of market movement. This reduces the volatility of the fund. Thus if price of the security falls, more units are bought and if price of the securities rises lesser units are bought.

To invest in mutual fund one should know the types of mutual fund available in the market. These are: equity funds, debt funds, balanced schemes, sector funds, gilt funds, index funds, MIPs (Monthly Income Plans), MMFs (Money Market Funds) ETFs etc. Each one of these schemes follows a different investment strategy. Most of the schemes have "growth oriented" or "dividend oriented" plans, which either re-invest or pay out the dividend collected from underlying stocks.

Equity Schemes: This type of fund predominantly invests in equity shares of companies. It provides returns by way of capital appreciation. This type of fund is exposed to high risk and hence return may fluctuate. As it invests only in stocks, it is riskier than debt funds. The returns will depend on the performance of the company that the fund invests in. However, on the flipside, this fund has a high return capability since equities have historically outperformed all other asset classes. There are several types of equity schemes based on different categorization parameters.

1. Large cap funds / blue chip funds - invest in large company stocks, typically from BSE 100 index. Generally low risk investment with moderate returns.

2. Mid cap / small cap funds - Mid cap & small cap funds are generally considered riskier because smaller companies have higher business risks. At the same time, they can give multi bagger returns because smaller companies can grow multi fold if they are successful.

3. Sector Funds: These funds are the riskiest amongst equity funds as these invest only in specific sectors or industries. The performance of sector funds depends on the fortunes of specific sectors or industries. This type of funds maximizes returns by investing in the sector, when the sector is expected to boom and gets out before it falls. You should invest in these funds only if you really understand the sector and its trends.

4. Index Funds: These funds track a key stock market index like BSE Sensex or NSE S&P CNX Nifty. It will invest only in those stocks which form the market index, as per the individual stock weightage. The idea is to replicate the performance of the bench marked index. The performance should ideally be better than or at least the same as the concerned index. The exit load of these schemes is usually lower than regular schemes.

Debt Schemes: Debt schemes invest mainly in income bearing instruments such as bonds, debentures, government securities and commercial paper. This type of fund basically invests in FD like instruments that pay interest based on various market factors. Its volatility depends on the economy reflected by factors such as the rupee depreciation, fiscal deficit and inflationary pressures. Broadly speaking, the returns from pure debt schemes will be in line with bank FDs. There are short term, medium term and long term debt funds based on the time horizon they cater to.

1. Gilt Funds: This is a sub-type of debt funds, which invests only in government securities and treasury bills. They are generally considered safer than corporate bonds and are more tuned towards long term investments.

2. Monthly Income Plans (MIPs): This is basically a debt scheme which invests a marginal amount of money (10%- 25%) in equity to boost the scheme's return. This fund will give slightly higher return than traditional long term debt scheme.

3. Money Market Funds (MMFs): These are also known as liquid funds. These funds are debt schemes that invest in certificate of deposit (CDs), Interbank call money market, commercial papers and short term securities with a maturity horizon of less than 1 year. The funds objective is to preserve principal while yielding a moderate return. It is a low risk- low return investment which offers instant liquidity.

Balanced Schemes / Hybrid Schemes: This scheme invests in both equity shares and in income bearing instruments in such a proportion that balances the portfolio. The aim is to reduce the risk of investing in stocks by having a stake in the debt market as well. It usually gives a reasonable return with a moderate risk exposure. There can be hybrid funds that are more oriented towards equity (60-70% in equity) and there can be debt oriented hybrid funds (60-70% in debt).

Fund of Funds: Fund of fund is a secondary fund, which invests in different types of funds based on market conditions. E.g. if the stock markets are in a bearish mood, it might be prudent to invest in debt, and not equity. So this kind of a fund will sell its equity holdings and buy units of debt fund of the same fund house. "Asset allocation funds" is also a term used for these kinds of funds that take a macro call and invest in equity, debt, gold or some other security.

Exchange Traded Funds (ETFs): These are the funds that are traded on the market like regular stocks. You don't need to pay Exit load to trade them, but you pay brokerage just like regular stocks. You can do intraday trading with ETFs, which is not possible with regular funds. There are ETFs that are based on Nifty (index), Gold and so on. Generally speaking, they are suitable for short term traders who want to take a position in the market using underlying security.

Read more our article :-

10 Smart Financial Moves You Should Make in 2021

"Financial planning is about more than just good advice or investment returns. It is about providing guidance that you can trust."

It is always beneficial to plan out and have a blueprint of your future finances ready. You certainly don't want to make a same financial blunder that you have made earlier. It's also important to plan your investments well.

The Budget 2018 was announced recently and while there is no change in personal income tax, long-term capital gains will be taxed at 10% for amount exceeding Rs. 1 Lakh, without indexing.

So, how should you plan 2018 to make it financially viable?

To make your financial year of 2018 a big HIT, here are 10 financial moves that you can take:

1.) Venture on a Term's Plan or Insurance

Life has its own course of running. You can never be aware of what is going to happen next. It is unpredictable and therefore it's important that you plan ahead.

Invest on a Term Plan, as a way to secure your family's future. Term plan or Term Insurance is a financial protection that helps your family financially in your absence. Term insurances are increasingly becoming popular as they come with loads of benefits.

2.) Have a Health Insurance

Health is wealth and there is no denying that fact.

Whether you've family or you're living an independent life, it must be your priority to invest on a health plan. Accidents and ailments aren't uncommon, and the sad part is that medical treatment isn't cheap in our country.

Having a Health Insurance helps you overcome sudden medical emergencies.

3.) Invest in a Systematic Investment Plans (SIPs)

It is one of the most simple and convenient manner to invest money in mutual funds. You have the liberty to venture your money either weekly, monthly, or quarterly. Systematic Investment Plans grant you an already decided amount to be paid uniformly at regular terms. This type of investment in mutual funds is regarded as the most safe and suitable kind in the market.

4.) Buy Real Estate

After the implementation of the Goods and Service Tax (GST) in the year 2017, realty investors weren't very sure about their financial security. However, the picture is likely to change in the year 2018. It seems the government is looking for new ways to revive growth in the real estate sector.

With the Real Estate Regulatory Authority Act (RERA) in place, there is no place for false promises by real estate developers. You'll also most likely not have to deal with cheating or delay in possessions. Also, the rates are low all across the country. Owing to the good market conditions, this can be the right time to purchase a house or a commercial property. But, make sure to leverage the benefits of a home loan while doing this costly transaction. Instead of paying the complete cost in cash, use a home loan to pay a part of the total cost and save on taxes. What better time to invest in real estate than now?

5.) Evergreen Fixed Deposits

It is a financial mechanism provided by banks where investors receive a high rate of interest varying from 4 to 6.5 percent than the normal savings. Here, your money is deposited in a Fixed Deposit account for a certain time period without and you can't withdraw it until its maturity. The maturity periods can vary from a week's time to 7 years depending on the investors. And since your money is locked, you don't have any other option than to save. Loan on your Fixed Deposit is available, which you can opt for in the case of emergencies.

6.) Tax Saving Investments

Balance your portfolio well and keep a tab on the tax saving instruments, while investing in the year 2018. You're eligible for a tax deduction of up to Rs. 1.5 lakh under Income Tax Act Section 80 (C). Ensure to use this carefully.

In the cases of traditional debt tax saving instrument, the returns have become lower over the past few months. Invest in options like ELSS to maximise your ROI.

PPF is another option you have. Though the rate of interest has gone down recently, your money is safe here.

In addition to that, use personal loan for expenses like child's education, home renovation. This will help you claim tax benefit under section 80 (C).

7.) Invest in Balanced and Liquid Funds

Debt Mutual Funds and liquid funds offer moderate returns, are tax-efficient, and will keep your hard-earned money safe. What percent of these should constitute your portfolio depends completely on you.

8.) Have a Proper Budget in Place

Having a proper budget in place and sticking to it is crucial.

Did you have a budget for 2017? If not, then it's time to have one. And if you already have one, make sure that it doesn't have the same loopholes as the one before.

Every single person needs to have a budget regardless of the money he or she earns. Keeping a constructive budget helps you to track your expenses. It will also help you in keeping a tab of your savings and planning your finances well.

9.) Assess your Monthly Expenditure

Keeping track of your monthly expenditure to know where your money is being spent. Spend some time going through your expenses and cut down on unnecessary spends. This will help you in the future to build up your savings.

10.) Sustain a Good Credit Score

An acceptable credit score assists you in a greater acquiring ability that will help you in accomplishing your dreams of purchasing a house or funding your child's education. Always keep a check on your credit score.

A low credit score has the potential of ruining your financial future. There are a few things you can do to improve your credit score: avail a mix of small value loans to for high-priced financial expenses like buying a car, funding your higher education, unsecured personal loans etc. Pay your credit card bills on time, manage your debts and other bills on time to maintain a good credit score for a secured future.

Use these tips to make 2021 a financially wealthy year for you. All the best! by

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