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Some of the Best Mutual Funds in India

July 23, 2014 Posted by admin

The popularity of mutual funds has increased over the last 20 years. These funds were once an obscure financial instrument, but are now part of our daily lives. Investing in these may prove better than simply letting your cash idle in a savings account. As opposed to spending a large amount of time exploring investment instruments, or decoding the jargon in financial newspapers, mutual funds are relatively easy to understand. They allow you to create financial freedom for yourself. Read on to know more about how best to make mutual funds work for you.

You can buy some mutual funds by contacting fund companies directly. Other funds are sold through brokers, banks, financial planners, or insurance agents. If you buy through a third party, you may pay a sales charge known as load. Funds can also be purchased through no-transaction fee programs sometimes referred to as, fund supermarkets. These programs let you buy funds from many different companies. They also provide a consolidated recording that includes all purchases made, even if they are from different fund families.

Investors understand the importance of portfolio diversification. Hence they invest in the best mutual funds in India. Investors should be aware of the risk return aspect of funds. It is prudent to make investments in tandem with your risk profile. The following mutual funds have inherent features of risk management. They can be a component of a balanced portfolio.

Arbitrage funds are a good bet in volatile stock markets. These are suitable for those interested in decent risk adjusted returns with less volatility. Arbitrage strategy takes advantage of price inefficiencies in the derivative segments. Derivatives are used to hedge risk in stock price movements. This fund will generate you money in uncertain times. Its other advantage is that it comes under equity taxation. This means the long term capital gain and dividend distribution do not attract any taxation.

Index funds replicate a particular stock market index like the Nifty or the Sensex. The fund’s composition is a mirror image of the index. There is no active management involved and the fund is expected to generate what a particular index is generating.

When investing in mutual funds, diversification among different sectors is important. It is advisable to diversify your investments internationally. This allows you to have exposure to the different world economies. Currency diversification occurs too. These days several funds focus on the U.S., Europe, China, and emerging economies. It is healthy to invest a minimum of 5 – 10 percent or more of your total investment into such kinds of funds.

In the last five years we have gone through many different market phases. We have seen both flattish and volatile stock market movements. Asset allocation with proper diversification and hedging is one strategy to build a good portfolio. For a good picture of a fund’s performance results, consider as many data points as you can. Long-term investors should focus on long-term results. One of the main benefits of a mutual fund is that it allows you to request that your shares be converted into cash at any time. This kind of liquidity option offers you a high degree of financial security and mobility.