Mutual Fund: Best Way to Save Money

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Explore top mutual funds for long-term investment goals. Learn about types, SIP, returns, and how mutual funds help achieve financial goals like retirement.

Mutual Funds

A mutual fund is one of the best ways to save money. It is an investment program funded by shareholders that trade in diversified holdings and is professionally managed. Mutual funds collect money from individuals who want to invest and manage it on their behalf, charging a fee or commission.

When investing in a mutual fund, remember your investment goal and invest accordingly for your

  • Retirement
  • Own a house in the future
  • Your children’s education
  • Marriage
  • Own car

Types of Mutual Funds:

1. Balanced Funds:

Balanced funds, also known as hybrid funds, invest in both stocks and bonds. These mutual funds are ideal for people looking for a mixture of safety, income, and modest capital appreciation. Investors typically allocate 60% of their assets to stocks and 40% to bonds, maintaining balanced growth with moderate risk.


2. ELSS Funds:

ELSS funds, or Equity Linked Savings Schemes, are open-ended equity mutual funds that help you save taxes while providing an opportunity to grow your money. These mutual funds are eligible for tax exemptions under Section 80C of the Indian Income Tax Act, making them a popular choice for tax-saving investments.


3. Liquid funds:

Liquid funds are a type of mutual debt fund, also known as short-term or ongoing funds. The money you invest in these funds is placed in very short-term market instruments, such as government securities and term deposits. These mutual funds offer safe returns, but the returns tend to be lower than other types of mutual funds.


4. Equity Funds:

Equity funds, also known as stock funds, are mutual funds where the entire amount is invested in stocks. These funds offer high returns but also come with higher risks. Investing in equity mutual funds is best suited for long-term goals, such as retirement, children’s education, or purchasing a house or car.


Monthly Investment Amount: ₹10,000

Expected Returns5 Years10 Years20 Years25 Years30 Years
8.0%7.4 Lac18.3 Lac58.9 Lac95.1 Lac1.5 Cr
10.0%7.7 Lac20.5 Lac75.9 Lac1.3 Cr2.3 Cr
12.0%8.2 Lac23.0 Lac98.9 Lac1.8 Cr3.5 Cr
15.0%8.9 Lac27.5 Lac1.5 Cr3.2 Cr6.9 Cr
20.0%10.1 Lac37.6 Lac3.1 Cr8.5 Cr22.9 Cr

Difference Between Regular and Direct Mutual Funds:

  • Direct funds are those mutual funds purchased directly from the company via their website or application.
  • Regular funds, on the other hand, are bought through brokers or distributors, where the mutual fund company pays a commission to the intermediary. The commission is not deducted from your installments but is recovered as an expense from your mutual fund plan.
  • When comparing direct and regular funds, the expense ratio is typically higher for regular funds compared to direct funds.
    Note: When investing in mutual funds, returns from a direct plan are typically higher by approximately 0.5% for equity funds and 0.2% for debt funds.

Top Mutual Funds to Invest in 2025:

Fund NameCategory2020 (%)2021 (%)2022 (%)2023 (%)2024 (%)
Canara Robeco Bluechip Equity FundLarge Cap17.6915.318.520.119.82
Axis Bluechip FundLarge Cap17.5114.817.919.717.03
Kotak Emerging Equity SchemeMid Cap19.1617.520.322.422.69
Axis Midcap FundMid Cap19.8618.22123.119.86
SBI Small Cap FundSmall Cap27.8125.428.630.727.81
Nippon India Small Cap FundSmall Cap24.8922.525.727.824.89
Parag Parikh Flexi Cap FundFlexi Cap26.4624.127.329.426.46
Quant Flexi Cap FundFlexi Cap35.8533.536.738.835.85
Mirae Asset Tax Saver FundELSS (Tax-Saving)22.520.123.325.422.5
Quant Tax PlanELSS (Tax-Saving)22.2719.923.125.222.27

Source: CNBC TV18, Coverfox, and Summa Money.

Systematic Investment Plan (SIP): Best Way to Invest Money

A systematic investment plan (SIP) is an excellent way to invest a fixed, small amount regularly in mutual fund schemes. It is similar to a recurring deposit (RD) in your bank. In SIP, you select a period (e.g., 1 year, 3 years, or perpetuity), intervals (e.g., weekly, monthly, quarterly), and the amount to invest.

The amount will be auto-debited from your bank account at the chosen interval. SIPs have gained significant popularity among retail investors in India, but many are still unfamiliar with how SIPs work.

Benefits of Starting a SIP:

Rupee Cost Averaging

Helps reduce the impact of market volatility.

Disciplined Investing

Ensures regular investment.

Flexibility

Choose the amount and frequency of investment.

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