There is no doubt that mutual funds are currently the most lucrative and best investment option in India. They are a great investment option for people who wish to grow their money over a period of time.

That’s why the total number of accounts (or folios as per mutual fund parlance) as on March 31, 2018, has crossed the milestone of 7 crores and stood at 7.13 crore.

Read More: What is Folio Number?

There is no single best mutual fund to invest in 2018. It all completely depends on what suits your needs. Therefore, here is a list of best mutual funds to invest in 2018 from every category. The below funds are also the best mutual funds for SIP.

3 Best ELSS Funds to Invest 

ELSS (ELSS full form: Equity Linked Savings Scheme) is a dedicated mutual fund that allows investors to save tax under Section 80C. It also provides an opportunity for long-term capital appreciation and is arguably the best tax saving instrument in India.

Ideal investment duration for these funds: 5 years (3 years is mandatory).

The best mutual fund scheme in this category are:

1. Aditya Birla Sun Life Tax Relief 96 Direct 

This fund is also known as BSL Tax Relief 96.

Minimum SIP amount: ₹500

Performance over the years:

Duration Returns
1 year  20.09%
3 years  15.52%
5 years  23.39%

2. Reliance Tax Saver (ELSS) Fund Direct

Minimum SIP amount: ₹500

Performance over the years:

Duration Returns
1 year  5.11%
3 years  9.26 %
5 years  21.18%

3. IDFC Tax Advantage (ELSS) Fund – Direct

Minimum SIP amount: ₹500

Performance over the years:

Duration Returns
1 year  22.42%
3 years  15.74%
5 years  23.36%

3 Best Large-Cap Funds

In the large-cap category, the best mutual funds are several as many mutual fund companies offer various funds.

Large-cap funds invest in large cap companies which are big, well-established companies of the equity market. These companies are strong, reputable, trustworthy, and generally are top 100 companies in a market by market cap.

Ideal investment duration for these funds: 4 years and above.

The best mutual fund scheme in this category are:

1. SBI Bluechip Fund

Minimum SIP amount: ₹500

Performance over the years:

Duration Returns
1 year  13.45%
3 years  13.29%
5 years  19.03%

2. Mirae Asset India Equity Fund 

Minimum SIP amount: ₹1,000

Performance over the years:

Duration Returns
1 year  14.89%
3 years  15.42%
5 years  21.52%

3. Reliance Large Cap Fund

Minimum SIP amount: ₹100

Performance over the years:

Duration Returns
1 year  13.58%
3 years  12.58%
5 years  19.00%

3 Top Mid Cap Mutual Funds

Mid-cap funds invest in compact companies of the equity market, falling between small and large cap companies and are 100-250 companies by market capitalization.

Ideal investment duration for these funds: 6 years and above.

The best mutual fund scheme in this category are:

1. Aditya Birla Sun Life Small & Midcap Fund

Minimum SIP amount: ₹1,000

Performance over the years:

Duration Returns
1 year  12.30%
3 years  22.67%
5 years  28.91%

2. L&T Midcap Fund

Minimum SIP amount: ₹500

Performance over the years:

Duration Returns
1 year  14.78%
3 years  21.16%
5 years  30.36%

3. Mirae Asset Emerging Bluechip Fund 

Minimum SIP amount: ₹1,000

Performance over the years:

Duration Returns
1 year  11.18%
3 years  21.65%
5 years  31.33%

Best Small Cap Mutual Fund

Small-cap funds invest in for small companies of the stock market and are all the companies apart from large and mid-cap companies in a market. These funds give high returns but are highly risky mutual funds.

Ideal investment duration for these funds: 7 years and above.

The best mutual fund scheme in this category are:

1. L&T Emerging Businesses Fund

Minimum SIP amount: ₹500

Performance over the years:

Duration Returns
1 year  22.29%
3 years  27.60%
5 years Not Available

2. HDFC Small Cap Fund – Direct

Minimum SIP amount: ₹1000

Performance over the years:

Duration Returns
1 year  28.95%
3 years  24.65%
5 years  25.89%

Multi-Cap Mutual Funds

In these funds, capital is invested in companies across different sectors and of different capitalization. Multi-cap funds are used to minimize the risk and diversify the investment.

Ideal investment duration for these funds: 5 years and above

The best mutual fund scheme in this category are:

1. Motilal Oswal Multicap 35 Fund

Minimum SIP amount: ₹1000

Performance over the years:

Duration Returns
1 year  13.79%
3 years  18.69%
5 years  25.89%

2. Aditya Birla Sun Life Advantage Fund

Minimum SIP amount: ₹1000

Performance over the years:

Duration Returns
1 year  9.76%
3 years  15.39%
5 years  23.32%

3. DSP BlackRock Opportunities Fund

Minimum SIP amount: ₹500

Performance over the years:

Duration Returns
1 year  12.67%
3 years  16.66%
5 years  20.93%

Sector Funds

The best mutual fund in case of sector funds is very hard to determine. This is so because each and every sector is different. Therefore, each of them behaves differently.

A sector fund is a type of mutual fund which invests in stocks of companies that operate in a particular industry or sector of the economy. Returns and risk associated with this fund depend on the sector of investment.

Ideal investment duration for these funds: Variable* (differs with the sector chosen for investment)

The best mutual fund scheme in this category are:

1. UTI Transportation and Logistics Fund

Minimum SIP amount: ₹500

Performance over the years:

Duration Returns
1 year  15.75%
3 years  15.08%
5 years  32.63%

2. Aditya Birla Sun Life Banking and Financial Services Fund

Minimum SIP amount: ₹1000

Performance over the years:

Duration Returns
1 year  14.80%
3 years  21.21%
5 years  Not Available

3. Sundaram Rural India Fund

Minimum SIP amount: Not Supported

Performance over the years:

Duration Returns
1 year  10.15%
3 years  21.20%
5 years  22.03%

4. L&T Infrastructure Fund 

Minimum SIP amount: ₹500

Performance over the years:

Duration Returns
1 year  16.14%
3 years  19.18%
5 years  24.83%

Index Funds

Index funds, as the name suggests, invest in an index.

These funds purchase all the stocks in the same proportion as in a particular index. Unlike actively managed mutual funds, index funds passively track the performance of a particular index. These funds are not meant to outperform the market, but mimic the performance of the index.

Ideal investment duration for these funds: Depends on which index the fund belongs to. 

The best mutual fund scheme in this category are:

1. ICICI Prudential Nifty Next 50 Index Fund

Minimum SIP amount: ₹1000

Performance over the years:

Duration Returns
1 year  9.51%
3 years  15.72%
5 years  19.53%

2. UTI Nifty Fund

Minimum SIP amount: ₹500

Performance over the years:

Duration Returns
1 year  16.03%
3 years  10.18%
5 years  13.22%

Debt Funds

Debt mutual funds are associated with much lower risk. The best debt mutual funds can give you more consistent returns when compared to equity mutual funds.

Debt funds are low-risk mutual funds which invest most of the money gathered from investors into fixed income instruments like corporate bonds, government bonds (both state and central), bonds issued by banks, certificate of deposit, treasury bills etc.

Ideal investment duration for these funds: Depends on the type of debt fund.

The best mutual fund scheme in this category are:

1. Axis Liquid Fund

Type of debt fund: Liquid

Ideal investment duration: Few days – Few weeks

Minimum SIP amount: ₹500

Performance over the years:

Duration Returns
1 year  6.93%
3 years  7.44%
5 years  8.14%

2. Indiabulls Liquid Fund

Type of debt fund: Liquid

Ideal investment duration: Few days – Few weeks

Minimum SIP amount: Not supported

Performance over the years:

Duration Returns
1 year  6.93%
3 years  7.57%
5 years  8.22%

3. L&T Short Term Income Fund

Type of debt fund: Short Term

Ideal investment duration: 1-3 Years

Minimum SIP amount: ₹1000

Performance over the years:

Duration Returns
1 year  7.09%
3 years  9.07%
5 years  8.84%

4. Franklin India Low Duration Fund – Direct – Growth 

Type of debt fund: Ultra Short Term

Ideal investment duration: 6 months to 1 year

Minimum SIP amount: ₹500

Performance over the years:

Duration Returns
1 year  8.06%
3 years  9.36%
5 years  9.62%

5. ICICI Prudential Long Term Plan – Direct – Growth 

Type of debt fund: Dynamic

Ideal investment duration: Variable*

Minimum SIP amount: ₹500

Performance over the years:

Duration Returns
1 year  6.55%
3 years  9.72%
5 years  11.43%

Hybrid/Balanced Fund

Balanced or hybrid funds are investment instrument, where an asset management company invest the money gather into both debt and equity. These are diversified mutual funds having the perfect balance between risk and returns on investment and are most popular mutual funds these days.

Ideal investment duration for these funds: 2-3 years

The best mutual fund scheme in this category are:

1. ICICI Prudential Balanced Advantage Fund – Direct – Growth 

Minimum SIP amount: ₹1000

Performance over the years:

Duration Returns
1 year  10.89%
3 years  11.38%
5 years  15.57%

2. Tata Retirement Savings Fund – Moderate Plan – Direct

Minimum SIP amount: Not Supported

Performance over the years:

Duration Returns
1 year  14.99%
3 years  15.56%
5 years  21.92%

3. Aditya Birla Sun Life Balanced 95 – Direct – Growth

Minimum SIP amount: ₹1000

Performance over the years:

Duration Returns
1 year  9.76%
3 years  12.71%
5 years  17.98%

4. Reliance Equity Hybrid Fund – Direct – Growth

Minimum SIP amount: ₹100

Performance over the years:

Duration Returns
1 year  14.61%
3 years  13.76%
5 years  18.43%

Gold Category

Gold funds are an excellent alternative to buying physical gold for investment purposes. Gold savings fund in simply a mutual fund that invest in Gold ETFs.

Ideal investment duration for these funds: Depends on the investor

The best mutual fund scheme in this category are:

SBI Gold Fund – Direct – Growth

Minimum SIP amount: ₹500

Performance over the years:

Duration Returns
1 year  11.30%
3 years  4.25%
5 years  1.51%

Things to Remember

There are a lot of factors you should look into before selecting a mutual fund scheme which will match your investment goals.

Following the few important things you should always remember before investing in Mutual Funds :

  1. Higher rates: don’t blindly invest in the fund with the highest returns. Invest based on the duration you want to invest for.
  2. Every person’s financial condition is different. Evaluate the funds you invest in yourself – don’t invest in a fund because of its popularity.
  3. Systematic Investment Plan (SIP) is much better and safer option for investing in equity oriented mutual funds.
  4. Direct plan for mutual fund gives you higher returns as compared to regular plan of mutual fund schemes.
  5. STP route is best for all those investors who wish to invest a lump sum in mutual fund schemes because this way they get the dual benefits of comparative risk investment.
  6. Review your investment from time to time but not too often. Once a few weeks is good enough.

Also, there are many myths and false beliefs about mutual funds circulating in the markets from time to time. The most successful investors are the ones that ignore the myths and pay attention only to what actually needs their attention.

Read More: 10 Secrets Only Successful Mutual Fund Investors Know

To know more tips of investing in a mutual fund, Read More: 10 Tips on investing in Mutual Funds

Happy Investing!

Disclaimer: the views expressed here are of the author and do not reflect those of Groww.