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Which are the best mutual funds to invest based on your risk appetite

Which mutual funds to invest in is a common question which always strikes the mind of the investors before investing. However, very few follow the right way when selecting mutual funds for their long term or short term investment needs.


However, if you are aware about your risk taking appetite, investment horizon and the investment objective then you have the answer of the question which mutual funds to invest in.


Based on SEBI guidelines, each mutual funds company (AMC) provides product level and Riskometer for each scheme which helps you understand the risk associated with each scheme and whether it is suitable for you or not.Typically mutual funds schemes are categorized into 5 risk profiles – Low, Moderately low, Moderate, Moderately high and High.


Let us analyze the following examples of Mutual Fund Scheme Riskometers and what they mean to the investors.


Low – It indicates that the investor understand that their principal will be at low risk.Generally low risk mutual funds are from debt fund category like, liquid mutual funds and ultra-short term funds. For investing in these funds your investment horizon should ideally be 3 to 6 months. However, you can invest in liquid funds even for few days.


Please read what are liquid mutual funds and which are the top performing liquid mutual funds in India


Moderately Low – It indicates that the investor understand that their principal will be at moderately low risk.Generally, moderately low risk funds are from debt fund category like, short term income funds. If your investment horizon is minimum 6 months to 2 years or above then these funds could be ideal mutual funds to invest in.


Know what are debt mutual funds in India and how they work


Which are the top performing short term debt mutual funds


Moderate - It indicates that the investor understand that their principal will be at moderate risk.Generally moderate risk funds are also from debt mutual fund category. Long term debt funds or income funds and monthly income plans (hybrid debt equity mutual funds) fall in this category of funds. If you have 3 years of investment horizon then these funds could be ideal investment option.


Did you know what are mutual fund income funds and what are mutual fund monthly income plans


See what is the performance of income funds in the last 3 years


Moderately High – It indicates that the investor understand that their principal will be at moderately high risk.It generally consists of schemes from balanced fund, equity income fund, Index fund, large cap equity mutual fund and ELSSfund category. Moderately high risk fund can be the ideal mutual funds to invest in provided your investment horizon is minimum 5 years.


Read what are balanced mutual funds in India and what are Index mutual funds


Please check the returns of top funds in these categories –


Balanced Funds


Large cap equity mutual funds


Equity linked saving schemes


High - It indicates that the investor understand that their principal will be at high risk.Generally high risk funds consist of schemes from the diversified, mid and small cap, sectoral and thematic equity fund categories.Your investment horizon for moderately high risk funds should be for 5 years and more.


Let us see which are the top performing mutual funds in this category?


Diversified equity mutual funds


Mid and small cap equity mutual funds


Thematic equity mutual funds


From the above you are clear that once you know your risk appetite and the investment horizon you can select the right mutual funds based on the matching ‘Riskometer’of the schemes and therefore, you clearly know which mutual funds to invest in.


Therefore, we can conclude by saying that the best mutual fund to invest in is the one which matches your risk profile and the investment horizon. Investing in a mutual fund scheme which suits your risk appetite is the most important aspect of achieving success from mutual fund investments.


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