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Best Mutual Funds for a young investor

Karan Sharma Karan Sharma 15 February 2019

As a young investor, it is imperative for you to consider the best of investment options available. Mutual funds deem to be the best buy! Let’s find out how..

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Before you begin your investment journey into the world of mutual funds, it is imperative that you have a substantial amount of savings at your disposal. Your savings must be satisfactory for at least six months. This is your emergency fund. In case something untoward happens to you, you know that you at least have sufficient money in your bank account.

Moving on further, mutual funds are best suited for young investors between the age of 20s and 30s. As the saying goes, the younger you start, the better the returns. This holds true for mutual funds. When you invest early, your money is invested for a longer tenure. This brings out higher market-linked returns in the long run. Therefore, it is ideal for you to invest as soon as you start earning or post the emergency fund.

Why are Mutual Funds good for young investors?

Let’s churn out the benefits of investing in mutual funds for young investors…

Simple and Convenient

As an investor, you need not be aware of the complex financial concepts required to invest in mutual funds. A mutual fund is managed by a group of financial experts on your behalf. Also, mutual funds are easy to research and subscribe. You can simply visit the website of the top performing mutual fund houses and purchase any number of funds online. Additionally, you can also see other details online such as fund performance, fund manager, NAV, fund size, rate of return etc.

Less Risky

Mutual funds are diversified investments which mitigate risk by investing in different sections of the market. They range from equity, debt or hybrid. Since the risk is diversified, mutual funds are much safer to invest in case you do not know how the stock market functions.

Cost Effective

Mutual funds do not require a large sum of investment. You can begin with a minimum of ₹500 per month. This is via a systematic investment plan. By investing on a monthly basis over a long tenure, you are less susceptible to market risks and will clearly benefit from rupee cost averaging.


An Equity Linked Savings Scheme is a tax-saving mutual fund which invests primarily in equities and comes with the dual benefit of tax savings and wealth creation. Under this plan, you are entitled to tax deductions up to ₹1,50,000 as per Sec 80C of the Income Tax Act, 1961.

What are the type of Mutual Funds?

There are three types of mutual funds:

Equity Based Mutual Funds

These are mutual funds which primarily comprise of shares and stocks of corporations/institutions and other equity related instruments. They come with a high risk but this is overcome with the potential benefit of higher returns.

Debt Based Mutual Funds

These funds comprise of debts, bonds and other government debt instruments. Debt mutual funds are a popular choice among risk-averse investors.

Hybrid Mutual Funds

These funds have investments in both, equities and bonds. They bring about a diversification of risk and balance out market volatility. To help you make a sound financial choice, we have specified each mutual fund on the basis of its category and performance.

Best Large Cap Mutual Funds - Ideal for a low risk appetite.

SBI Blue Chip Fund

TypeEquity Large Cap
Fund Size (Crores)₹20,610
1 yr (%)- 9.80
3 yrs (%)9.22
5 yrs (%)15.39

Mirae Asset India Equity Fund

TypeEquity Multi Cap
Fund Size (Crores)₹10,036
1 yr (%)- 6.63
3 yrs (%)15.38
5 yrs (%)18.91

Reliance Large Cap Fund

TypeEquity Large Cap
Fund Size (Crores)₹11,740
1 yr (%)- 6.73
3 yrs (%)13.72
5 yrs (%)17.30

Best Mid Cap Funds - Suitable for a high risk appetite.

Principal Emerging Bluechip Fund

TypeEquity Midcap
Fund Size (Crores)₹2,054
1 yr (%)- 15.28
3 yrs (%)14.45
5 yrs (%)22.87

L & T Midcap Fund

TypeEquity Midcap
Fund Size (Crores)₹3,685
1 yr (%)-16.70
3 yrs (%)13.83
5 yrs (%)23.93

Mirae Asset Emerging Bluechip Fund

TypeEquity Large and Midcap
Fund Size (Crores)₹6,340
1 yr (%)-6.94
3 yrs (%)18.02
5 yrs (%)27.34

Best Small Cap Funds - Excellent for a high risk appetite.

L & T Emerging Businesses Fund

TypeEquity Large and Midcap
Fund Size (Crores)₹6,340
1 yr (%)-6.94
3 yrs (%)18.02
5 yrs (%)27.34

HDFC Small Cap Fund

TypeEquity Small Cap
Fund Size (Crores)₹6,031
1 yr (%)-10.93
3 yrs (%)17.78
5 yrs (%)20.33

If you are looking for a small tenure of investment, then, you need to look for liquid funds which come with an investment horizon of 90 days to 1 year. These funds primarily invest in bonds and debt related instruments and carry a minimum risk. They are a suitable option in place of FDs or bank deposits.

Axis Liquid Fund

TypeDebt Liquid
Fund Size (Crores)₹20,025
1 yr (%)7.57
3 yrs (%)7.33
5 yrs (%)7.89

Indiabulls Liquid Fund

TypeDebt Liquid
Fund Size (Crores)₹3,165
1 yr (%)7.37
3 yrs (%)7.28
5 yrs (%)7.87

Principal Cash Management Fund

TypeDebt Liquid
Fund Size (Crores)₹392
1 yr (%)-1.79
3 yrs (%)4.10
5 yrs (%)5.91

Ultra-Short Term Funds

Suitable for instant redemption and comes with a low risk.

Franklin India Ultra-Short Bond Fund

TypeDebt Ultra Short Term
Fund Size (Crores)₹15,063
1 yr (%)9.07
3 yrs (%)8.97
5 yrs (%)9.30

Kotak Savings Fund

TypeDebt Ultra Short Term
Fund Size (Crores)₹7,416
1 yr (%)7.69
3 yrs (%)7.50
5 yrs (%)8.07

As an investor, it is advisable to know the basic knowledge of investing in mutual funds. Though there are many funds across different sectors and categories, a few mentioned above are known for consistent returns. You do not need to subscribe to all of these funds, select the mutual fund as per your financial objective.

Recommended Read: How will I Make Right Mutual Funds Investment?

Karan Sharma
Written by Karan Sharma
Content Specialist and Strategist, foolishly creative and always ready for a game of 'Call of Duty'.