Best Mutual Funds in India

What are the Best Mutual Funds?

A mutual fund is a professionally managed investment product that pools money from multiple investors to collectively invest in a diversified portfolio of stocks, bonds, or other securities. These funds are managed by experienced portfolio managers who make investment decisions based on the fund's objectives and strategy. The best mutual funds offer individuals an accessible way to invest in a wide range of assets, providing diversification and professional management. 

Investors can redeem or buy fund units at the current NAV or net asset value. Since mutual funds are governed by the Securities and Exchange Board of India, they are renowned to be a haven for your money. Investing in mutual funds in India has the benefit of helping investors to scale up their investment with a relatively small initial amount, which is why Investors often explore the best SIP in India for long-term growth.

Best Mutual Funds to Invest in India

Here is a list of top performing mutual funds to invest in India, based on their 1-year, 3-years and 5-years returns:

1. Best Equity Mutual Funds

   To invest in equity mutual funds look for maximum long-term returns and high risk, look at top-performing Small Cap Funds. For a balanced, core portfolio with diversified exposure, a strong Flexi Cap Fund is often the preferred choice.

   Fund Name	AUM	Return 3 Years	Return 5 Years	Return 10 Years	Minimum Investment	Return Since Launch
   ICICI Prudential BHARAT 22 FOF Direct - Growth	₹2,315.59 Crs	28.44%	35.4%	N/A	₹5,000	17.77%
   Motilal Oswal Midcap Fund Regular-Growth	₹33,608.53 Crs	25.97%	33.24%	17.66%	₹500	22.31%
   HDFC Mid Cap Fund Regular-Growth	₹83,847.39 Crs	25.7%	29.27%	18%	₹100	17.68%
   Nippon India Multi Cap Fund Direct-Growth	₹45,881.41 Crs	23.34%	31.02%	15.95%	₹100	16.94%
   Edelweiss Mid Cap Fund Regular-Growth	₹11,026.93 Crs	24.31%	29.1%	17.94%	₹100	13.91%

2. Best Performing Debt Mutual Funds

   Best Debt Mutual Funds are schemes that pool investor money to invest primarily in fixed-income securities like Government Bonds, Corporate Bonds, Treasury Bills, and Certificates of Deposit.

   Fund Name	AUM	Return 3 Years	Return 5 Years	Return 10 Years	Minimum Investment	Return Since Launch
   HDFC Income Plus Arbitrage Active FoF Regular-Growth	₹1,384.27 Crs	12.76%	14.79%	11.13%	₹100	10.56%
   Invesco India Credit Risk Fund Direct-Growth	₹151.64 Crs	10.72%	7.77%	6.87%	₹1,000	7.3%
   ICICI Prudential Short Term Fund Direct Plan-Growth	₹22,069.50 Crs	8.55%	7.18%	8.21%	₹5,000	8.57%
   Axis Corporate Bond Fund Direct-Growth	₹9,402.54 Crs	8.49%	6.87%	N/A	₹100	7.72%
   Tata Money Market Fund Direct-Growth	₹41,234.54 Crs	7.83%	6.4%	6.17%	₹5,000	6.78%

3. Best Performing Hybrid Mutual Funds

   Hybrid Mutual Funds invest in a combination of two or more asset classes, most commonly mixing equities for growth potential and debt or stability and income. This structure allows them to offer a balanced risk-reward profile

   Fund Name	AUM	Return 3 Years	Return 5 Years	Return 10 Years	Minimum Investment	Return Since Launch
   ICICI Prudential Retirement Fund - Hybrid Aggressive Plan Direct - Growth	₹902.14 Crs	22.64%	22.14%	N/A	₹5,000	17.7%
   Quant Multi Asset Allocation Fund Regular-Growth	₹3,666.25 Crs	21.73%	26.47%	17.55%	₹5,000	11.68%
   Nippon India Multi Asset Allocation Fund Regular - Growth	₹6,649.41 Crs	21.01%	18.13%	N/A	₹5,000	17.68%
   Aditya Birla Sun Life Multi - Asset Passive FoF Regular-Growth	₹19.01 Crs	N/A	N/A	N/A	₹100	18.17%
   ICICI Prudential Multi Asset Fund Direct-Growth	₹63,001.13 Crs	21.13%	25.84%	16.67%	₹5,000	16.97%

4. Best Mutual Funds for SIP to Invest in India

   Choosing the right Mutual Funds for a Systematic Investment Plan (SIP) in India depends heavily on your financial goal, risk tolerance, and investment horizon and long term planning. 

   Fund Name	AUM	Return 3 Years	Return 5 Years	Return 10 Years	Minimum Investment	Return Since Launch
   SBI PSU Fund-Growth	₹5,278.16 Crs	31.67%	32.69%	13.87%	₹5,000	8.1%
   ICICI Prudential BHARAT 22 FOF Direct - Growth	₹2,315.59 Crs	28.44%	35.4%	N/A	₹5,000	17.77%
   ICICI Prudential Infrastructure Fund-Growth	₹7,941.20 Crs	28.79%	37.23%	17.14%	₹5,000	15.97%
   Aditya Birla Sun Life PSU Equity Fund Regular-Growth	₹5,418.32 Crs	29.67%	33.07%	N/A	₹500	23.23%
   Motilal Oswal Midcap Fund Regular-Growth	₹33,608.53 Crs	25.97%	33.24%	17.66%	₹500	22.31%
   HDFC Infrastructure Fund Regular-Growth	₹2,539.90 Crs	28.21%	34.27%	11.72%	₹100	9.33%

How to Choose the Best Mutual Fund to Invest in 2026?

Choosing the best mutual fund to invest in is a crucial decision that can significantly impact your financial future. Here are some key steps to help you make an informed decision:

1. Define Your Financial Goals:

   Begin by identifying your specific financial goals. Are you saving for retirement, purchasing a home, or funding your child's education? Understanding your objectives will guide you towards the right type of mutual fund.

2. Risk Tolerance Assessment:

   Assess your risk tolerance. This is a critical factor that influences the type of mutual fund you should choose. If you're risk-averse, you might opt for more conservative funds. For those comfortable with higher risk, aggressive growth funds might be suitable.

3. Understand Different Types of Mutual Funds:

   Mutual funds come in various types, including equity funds, debt funds, hybrid funds, and more. Each type serves a different purpose and carries a distinct level of risk. Familiarize yourself with these categories to determine which aligns best with your goals.

4. Expense Ratio Evaluation:

   The expense ratio is the annual fee expressed as a percentage of your investment. Lower expense ratios are generally better, as they reduce the overall cost of owning the fund. Look for funds with competitive expense ratios.

5. Historical Performance Analysis:

   While past performance does not guarantee future results, it is crucial for evaluating a fund. Focus on consistent, long-term performance across different market cycles, not just short-term returns. 

6. Professional Management and Fund House Reputation:

   Research the fund manager's track record and experience. A skilled manager can make a significant difference in a fund's performance. Additionally, consider the reputation and credibility of the fund house or company managing the mutual fund.

7. Diversification and Portfolio Holdings:

   Ensure that the fund offers adequate diversification across different asset classes and industries. A well-diversified fund can help spread risk and potentially enhance returns.

8. Check for Load and Exit Fees:

   Some funds charge a front-end load (when you buy) or back-end load (when you sell). Avoiding these fees can help maximize your investment returns.

9. Stay Committed for the Long Term:

   Avoid making impulsive decisions based on short-term market fluctuations. Mutual funds are typically designed for long-term investing, so it's important to stick to your investment strategy.

10. Regular Review and Rebalancing:

    Periodically review your mutual fund portfolio and check returns on your investments using the SIP Calculator to ensure it continues to align with your goals and risk tolerance. Rebalance if necessary to maintain the desired asset allocation.

11. Consult with a Financial Advisor:

    If you're uncertain about which mutual fund(s) to choose, consider seeking advice from a qualified financial advisor like Policybazaar. They can provide personalized recommendations based on your unique financial situation.

How is Tax Applied on Best Mutual Funds in India?~

The tax on mutual funds in India depends on the type of mutual fund and the holding period. Here is a breakdown of how tax is applied on mutual funds:

1. Equity Mutual Funds

   Short-term capital gains (STCG): If you sell your equity fund units within one year of purchase, the gains are considered STCG and are taxed at a flat rate of 20%.

   Long-term capital gains (LTCG): If you sell your equity fund units after one year of purchase, the gains are considered LTCG and are taxed at a flat rate of 12.5% on gains above Rs.1.2 lakh per financial year.

2. Debt Mutual Funds

   STCG: If held for 24 months or less, it's taxed as Short-Term Capital Gains (STCG) at your regular income tax slab rate.

   LTCG: If held for more than 24 months it will be applicable at a rate of 12.5% 

3. Hybrid Mutual Funds

   The tax on hybrid mutual funds depends on the asset allocation of the fund. If the fund has an equity exposure of 65% or more, then it is taxed as an equity fund. If the fund has an equity exposure of less than 65%, then it is taxed as a debt fund.

Conclusion

Mutual Funds are professionally managed investment options in India offering a diverse and secure way for investors across different asset classes like equity, debt, and hybrid. The "best" fund is subjective, requiring investors to match their financial goals, risk tolerance, and investment horizon with the fund's category. If you are looking for a way to invest in the Indian stock market and achieve your financial goals, then investing in the best mutual funds through SIP is a great option.