New investor? Here are 3 mutual fund categories for you to invest in

How to decide which mutual fund is best for your needs? It basically depends on your own specific circumstances and factors including your financial position, the amount you can invest every month, your risk appetite and your financial goals/objectives. If you are a new investor who is just venturing into deploying capital in equity investments, you should look at equity mutual funds instead of direct trading in equity first. When it comes to direct equity-based stocks/shares, you will have to undertake comprehensive research and gather more knowledge before taking the plunge.

As for mutual funds, there will be professional managers and experts taking investment decisions and tracking the performance of the same. These are industry professionals who possess a thorough understanding of the market and stock-based dynamics in an intrinsic manner while helping manage your money with strategic and calculated risks. If you are still thinking of how to start a mutual fund plan, you can consider three types of equity-based funds, namely equity index funds, large-cap equity funds and aggressive hybrid funds. These are funds which may help you participate in equity markets with lower risks as compared to various types of equity funds.

Particular requirements to invest in mutual funds

Are you already taking a look at renowned options like Axis mutual funds and similar options? You can think of deploying your investments with the help of systematic investment plans or SIPs. These will help you absorb and spread out market risks more efficiently while lowering risks of losses at the same time. SIPs will also help you inculcate discipline with regard to saving and investing. The horizon/time-frame should be a minimum of 5 years or more.

Before checking out popular picks here are some fund types that you may consider.

  1. Large Cap Funds– As required by SEBI (Securities and Exchange Board of India), large-cap funds deploy mutual fund investment in India throughout 80% of companies which are ranked between 1-100 in terms of market capitalization. These are funds buying shares included majorly within the Nifty 100, Nifty 50 or even BSE 100 indices. Sometimes shares of blue-chip companies or corporations are also included, i.e. those organizations with sizable potential for earnings. These funds have lower levels of volatility and are able to better withstand market fluctuations and other adjustments. These funds are better equipped to handle downturns or fluctuations in the market throughout bearish or corrective stages. Mid-cap and multi-cap funds often have higher risks. At the same time, large-cap funds may not perform as well as smaller peers during an equity market rally. However, they do churn out higher returns (adjusted for risks) in the long term.


  1. Index Funds– These are basically funds under passive management and look at syncing with the performance of the underlying benchmark minus any active management of fund managers and professionals. They mimic the index portfolio like Nifty 50. This is done through investments in shares which are a part of the said index and in the same proportion as they are within the same. Funds which are actively managed always strive to surpass the performance of their benchmarks with the help of strategies taken by fund managers.


This is hence a major difference. Index funds, however, have lower expense ratios in comparison to actively managed mutual funds.  Index funds are suitable for those looking for returns linked to the benchmark or index. You may find funds tracking the Nifty 500, Nifty 50 and Nifty Subsequent 50 indices. The Nifty 50 is one of the highest-traded indices globally while the Nifty Subsequent 50 enables deploying money into shares with the potential to be included in the Nifty 50 Index in future. The Nifty 500 index looks at more than 95% of the listed companies on the National Stock Exchange (NSE) with regard to large market capitalization.


  1. Aggressive Hybrid Funds– Aggressive hybrid funds are those allocating approximately 65-80% of the corpus into equity-based investments while the remainder will be deployed across debt. Upper allocation towards equity investments may help in getting handsome long-term returns. At the same time, the debt component helps in lowering losses during any fluctuation/downturn in the market. The funds are perceived in the manner of equity funds in terms of taxation. Aggressive hybrid fund plans have lower depreciation levels in spite of market corrections although they appreciate lesser during market rallies. Lower volatility may help you garner superior returns (adjusted for risks) which contrast with various equity-based asset classes over the long haul. The multi-cap method is usually used for management of the equity component of these funds while the debt component is deployed through various earnings channels with diverse maturity periods.

Now that you are aware of the types, you can select from either some of the renowned funds like Axis multicap fund and others. Remember that it is always safe to commence investing in equity through mutual funds which are professionally managed by experts as compared to direct equity investments. The latter entails deploying investments all by yourself and tracking performance on your own.

There is a bigger risk of incurring a loss in this scenario. It is much better to seek advice from an industry expert or professional expert and this is possible if you invest through mutual funds. Additionally, mutual funds help you spread out risks considerably through SIPs (systematic investment plans). This is a major plus point by all means.

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