Mutual Funds to Look Forward to in 2024

Thinking about investing in mutual funds? If so, then this article can help. This article will help you understand the different types of mutual funds that you can consider investing. Also, no matter whether you are new to mutual funds or have some experience, this article covers different types of mutual funds based on investment goals and risks you’re comfortable with. So, if you’re looking to start investing in mutual funds, then this year-end special mutual fund guide can help you. In addition, we will also discuss how to choose the mutual fund by taking into account factors such as investment goals, risk appetite, taxation, etc.

Types of Mutual Funds

You can select mutual funds based on your financial goals, risk appetite, and investment horizon. There are different types of mutual funds available based on asset allocation, structure, and investment goals. Below are the mutual funds that can align with your investment objectives.

1. Growth Funds
These funds invest in shares and sectors that have high growth potential, such as technology, biotechnology, or emerging markets. They are suitable for investors who have a decent amount of money and are willing to take high risks for higher returns.

2. Income Funds
These funds invest in fixed-income securities that generate regular income for investors, such as government securities, bonds, debentures, and fixed deposits. They aim to balance capital safety and growth over time, so they look for income-producing investments with low risk.

3. Liquid Funds
These funds invest in short-term debt instruments that mature within 91 days, such as commercial paper, government securities, and treasury bills. They calculate their net asset value (NAV) every 365 days. They are ideal for investors who want to park their surplus funds for a short period of time and earn higher returns than savings accounts.

4. Tax-Saving Funds
The type of mutual fund that invests a major portion of its corpus into equity or equity-related instruments. Additionally, it is known as Equity Linked Savings Schemes (ELSS)*. These funds are called tax-saving schemes because they provide a tax benefit, allowing you to save up to Rs. 150,000 from your yearly taxable income under Section 80C of the Income Tax Act.

5. Fixed Maturity Funds
A fixed maturity fund is a type of closed-ended fund with a fixed tenure. They invest in stocks, bonds, or money markets that match their maturity date. For investors uncomfortable with the debt market trends, fixed-maturity funds can be an option.

6. Pension Funds
These funds are schemes that accumulate a corpus for retirement and may or may not offer annuity options. Annuities are contracts that provide a fixed or variable income stream for life or a specified period. These funds help investors achieve their retirement goals and live a financially independent life. They can also be used to fulfill post-retirement goals, such as buying a house, traveling, taking up a hobby, or starting a business.

How to Choose a Mutual Fund
The following are some factors to consider when choosing a mutual fund.

1. Investment Objective
Know your investment objective before you select the right mutual fund. Consider whether you're looking for growth or a regular income. Long-term capital appreciation can be achieved with equity funds, whereas regular income can be obtained from debt funds.

2. Risk profile
Your risk profile will help you choose the right mutual fund. To ensure you are taking the right amount of risk, you should know the risk profile of a fund. An equity fund can be considered by an investor with a moderately high to high-risk appetite. On the other hand, a bond fund or debt fund can be considered by an investor with a low to moderate risk appetite.

3. Taxation
When figuring out how to select a good mutual fund, understanding taxation becomes crucial as it helps you understand the tax implications of your investments. You can consult a tax advisor to understand the tax implications of your investment.

4. Lump Sum or SIP
Having chosen the right mutual fund, you should decide if you want to invest in lump sums or through SIPs. Through SIPs, you can take advantage of rupee cost averaging and compounding. If you have ready funds, you can invest in lump sums.

5. Fund Manager and Fund House Track Record
Be sure to check the long-term track record of the scheme, its fund manager, and the fund house before investing.

6. Expense Ratio
An expense ratio is the annual fee mutual funds charge for managing your investment. When choosing a mutual fund, consider the expense ratio, as high fees can affect your gains over time.

Conclusion
If you are thinking of starting mutual fund investing, you can consider above mentioned mutual fund types. However, before you invest, it is crucial to do research. Understanding your investment objectives, risk appetite, and other factors such as taxation, lump sum vs SIP, expense ratio, etc are also crucial. While investing, it is essential to make well-informed decisions. So, if you are new to investing, you can seek expert advice.

FAQs on Mutual Fund

Can I invest 5000 in mutual funds?
Yes, you can invest Rs. 5000 every month in a mutual fund Systematic Investment Plan (SIP) or Lumpsum of your choice, but it depends on the minimum application amount of different schemes. Depending on the type of fund you choose, such as equity, debt, or hybrid, you may create potential returns to meet your long-term goals.

What is the lock-in period in mutual funds?
A lock-in period in mutual funds refers to the period during which the investor is prohibited from redeeming the fund’s units. The lock-in period varies for different types of mutual funds. For instance, tax-saving funds have a lock-in period of three years, close-ended funds have a lock-in period till their maturity date, and interval funds have a lock-in period between two specified dates.

Are Mutual Funds a safe investment?
All investments, such as stocks, bonds, and mutual funds, carry some level of risk. The degree of risk of a particular mutual fund depends on its investment strategy, holdings & risk management strategy. Generally, mutual funds follow the risk-reward trade-off, which means that higher returns come with higher risks and vice versa. To reduce the risk of investing in mutual funds, investors can diversify their portfolio across different asset classes, choose funds that match their risk profile, and review the fund performance periodically.

What is a Mutual Fund Return Calculator?
A mutual fund return calculator is a tool that investors can use to evaluate a fund’s performance. Using this calculator, investors can estimate the Return On Investment (ROI) generated by a mutual fund for a particular period. To use the calculator, investors need to enter some inputs, such as the amount invested, the duration of investment, and the expected rate of return. The calculator will then show the future value of the investment and the annualized return.

*ELSS Investments are subject to a 3-year lock-in period and are eligible for tax benefit under section 80C of the Income Tax Act, 1961.

As per the present tax laws, eligible investors (individual/HUF) are entitled to deduction from their gross income of the amount invested in Equity Linked Saving Scheme (ELSS) up to Rs.1.5 lakhs (along with other prescribed investments) under section 80C of the Income Tax Act, 1961. Tax savings of Rs. 46,800 mentioned above is calculated for the highest income tax slab.

Finance Act, 2020 has announced a new tax regime giving taxpayers an option to pay taxes at a concessional rate (new slab rates) from FY 2020-21 onwards. Any individual/ HUF opting to be taxed under the new tax regime from FY 2020-21 onwards will have to give up certain exemptions and deductions. Since, individuals/ HUF opting for the new tax regime are not eligible for Chapter VI-A deductions, the investment in ELSS Funds cannot be claimed as deduction from the total income.

Investors are advised to consult his/her own Tax Consultant with respect to the specific amount of tax and other implications arising out of his/her participation in ELSS
Note: Views and opinions contained herein are for information purposes only and should not be construed as investment advice/ recommendation to any party or solicitation to buy, sell, or hold any security or to adopt any investment strategy. It does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses, and damages arising out of the use of this information. The recipient should exercise due caution and/ or seek professional advice before making any decision or entering into any financial obligation based on information, statement, or opinion that is expressed herein.

Statutory Disclaimer: Axis Mutual Fund has been established as a Trust under the Indian Trusts Act, 1882, sponsored by Axis Bank Ltd. (liability restricted to Rs. 1 Lakh). Trustee: Axis Mutual Fund Trustee Ltd. Investment Manager: Axis Asset Management Co. Ltd. (the AMC). Risk Factors: Axis Bank Limited is not liable or responsible for any loss or shortfall resulting from the operation of the scheme. No representation or warranty is made as to the accuracy, completeness, or fairness of the information and opinions contained herein. The AMC reserves the right to make modifications and alterations to this statement as may be required from time to time.

Past performance may or may not be sustained in the future.

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.