Mutual Funds in India – How to make a profitable investment portfolio

Are you looking for information on what mutual funds are or how to invest in mutual funds? Do you want to know which mutual funds to invest in ? You need look no further. Read on to know all about the best mutual funds to invest in India. Learn tips on how to create the perfect portfolio that will make your investment grow.

You may wonder what is the need to invest in mutual funds when you can directly invest in the stock market? Well to begin with having basic knowledge about share market is insufficient for anyone as it will not assure profit on your investment. To be able to make good profit you need to have in-depth information about the share market. Remember it is a long drawn process that needs not just time and effort but also constant monitoring of stocks to pick the profitable ones. To cut it short, it is not a piece of cake and requires much diligence and time.

If you invest in stocks and shares you can expect a profit of approximately 20% to 30% on your investment provided you invest in the right shares and buy and sell them at an opportune time. By investing in mutual funds of a good company you can easily gross a minimum profit of 15% without effort from your end. This saves you the trouble of trading in stocks but helps in making an indirect profit from shares.

Mutual Fund Investments - Create Perfect Portfolios

If you want to make money from the stock market it is best to put your money in mutual funds. Let me explain.
Mutual Fund companies employ experts who follow the perfect strategies to study the market trend. They understand different market scenarios which you and I do not. They know the global market and the developments that take place there and how they affect the Bombay Stock Exchange and NIFTY. They use their knowledge and invest in shares with prospects of being profitable. Instead of focusing on a particular company they tactically spread the investments into diverse stocks so the chance of loss lowers.

How to Study Mutual Fund Portfolio

If you have invested in mutual funds it is imperative that you learn to track the investments of the fund. Here are a few tips that can be of help -
  • Mutual funds make public their portfolios every six months. You need to study this carefully
  • Most mutual funds provide an abridged summary of their portfolio every month. It is concise and it would be nice if you could go through it before investing
  • You will need to check how the investment is distributed; that is the ratio between large and small caps
  • Study the stock classification; check the ratio of large market capitalization against small caps
  • Check the debt classification; see if the fund has the CRISIL AAA rating for debt
  • Does the fund have liquid stocks? This means stock that has been sitting idle for more than a month. This is not a good sign
  • Check the cash to stocks ratio. Maximum amount of your money must be invested
  • How much dividend has the fund announced for the previous financial year
  • Has the fund invested in a company that is in red? This is bad news, as it will take you years to make up the loss

Understand the Difference between Debt Fund and Equity Fund

You do not have to be a financial wizard to be able to find if the fund is debt based or equity based. You need to read the fine print in the offer document where the fund clearly states its objectives. Mutual fund companies' investments are chiefly done in equities although the fund may allocate a small percentage of the investment for debt. However, there are a few mutual funds that invest only in debt. You also have an option of selecting a balanced fund with a specific balance of debt and equity which it maintains.

Best Mutual Funds to Invest

How does one categorize the best mutual funds? There is no particular grading method for individuals to follow. The fund that gives the best returns on an investment over a period of time can be termed as being viable. Here some funds that have been giving promising results since the time they were opened.

HDFC Equity Fund Growth

This fund has been around for almost 16 years. In this period the fund has given steady returns of over 22%. Remember this includes the phase when the market was sluggish because of a global financial crisis. This is a good fund to invest in. In the period since 2007 up till now the fund has given its investors returns of around 19%.

HDFC Top 200 Growth

The fund opened in 1996 and has since been consistently giving good returns to its investors. This fund has a good track record and is an excellent fund to invest in even today.

IDFC Premier Equity Growth Plan – A Growth

The fund started in 2005 September and recorded good growth in a short period. It has the potential to continue doing well. In the first 7 years since its launch the fund gave returns of almost 23%. This was again a period where the market was unstable.

Here are top 5 mutual funds under different categories that you can invest in–

Diversified Mutual Funds
Top 5 Diversified Mutual Funds 2012
Debt Schemes Mutual Funds
Top 5 Debt Schemes Mutual Funds 2012
Balanced Schemes Mutual Funds
Top 5 Balanced Schemes Mutual Funds 2012

My Opinion on Mutual Funds

I am no financial analyst and my opinion is based on pure experience. Yes, I study the market to identify the best funds before investing. Here are the best mutual funds for your investment portfolio and a list of tips on how to pick the best mutual funds . I can confidently say mutual funds are a safe way of earning profit. I know my mutual fund portfolio is managed by experts in the field so the chances of loss are minimal. Ask me anything about mutual funds and I will willingly share my knowledge with you.

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Author: BarathVikraman02 Feb 2015 Member Level: Gold   Points : 2

very informative article! Investing money in mutual funds can prove risky all the time. According to me it is the option which does not give any guarantee about high or even low profit but it gives you warning about the risk factor any time. Generally it is seen that people invest money in the funding scheme of the company which has shown best performance currently. But this practice also is risky as the company performance may go down this year. It is necessary to remember many things like the overall performance of the company from last few years, and even the experience of fund manager of that company. So what I feel is it is not advisable to invest money in mutual fund without having perfect knowledge about the scheme.

Author: Dhruba19 Mar 2015 Member Level: Gold   Points : 3

Yes, it is a very good elaboration on Mutual fund and portfolio -investors guideline based on your own practical experience.Thanks for sharing on such a topic.Regarding portfolio management we need to maintain the following objectives as there is a risk in all fields and we need to earn out of it
Keep the security, safety of Principal sum intact both in terms of money as well as its purchasing power.
Stability of the flow of income so as to facilitate planning more accurately and systematically the re-investment or consumption of income.
To attain capital growth by re-investing in growth securities or through purchase of growth securities.

Marketability of the security which is essential for providing flexibility to investment portfolio.

Liquidity i.e.nearness to money which is desirable for the investor so as to take advantage of attractive opportunities upcoming in the market.
Diversification: The basic objective of building a portfolio is to reduce the risk of loss of capital and income by investing in various types of securities and over a wide range of industries.
Favorable tax status : The effective yield an investor gets from his investment depends on tax to which it is subject. By minimizing the tax burden, yield can be effectively improved.
Accordingly we should also follow these basic rules for investing in the Market.

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