Best Mutual Funds in India for 2012

The concept of mutual funds in India is rather young and there are still several people, who are quite hesitant about this investment option. As the financial year 2012-13 is just a few months away, several among you, may be looking out for good investment options. Here, an explanation of mutual funds, their classification and a very well performing fund of each category have also been included.

What is a Mutual Fund

• People with free cash lying around can invest their money into any mutual fund which is operated by financial institutions, companies and banks. These mutual funds are managed by very well qualified fund managers, who tend to have a high-caliber of expertise for investment. There are some excellent strategies, based upon which, funds are invested in. The end product of the right investment strategy and its execution is referred to as the portfolio, which is the collection of securities, which are invested in.
• The investors put in money into a pool and are allocated 'units' or 'shares', on the basis of how much they have put into the pool. A Net Asset Value (NAV) of the total fund can be computed and the proportionate NAV of each contributor (i.e. units allocated multiplied by the NAV) is used to pay off the returns. Thus more the NAV, better would be your returns.
• The money thus pooled in, is invested by the fund manager and company, into the decided portfolio. The investments are in several cases, bought and sold to realize profits. This trading is carried out by the fund manager and his team. Common investment destinations include, shares, stock, bonds, debentures and in some cases, money market instruments and also securities in offshore high yield accounts.
• The fund companies who provide this facility, charge some loads or commissions, such as entry load, exit load, deferred load, sales charge, etc. This usually amounts to about 1% to 5% of the total invested amount.

Please note, there is almost no way to deem or arithmetically term any mutual fund as the 'best', there are several which are really good ones. In the following paragraphs, some of my personal favorites, the ones recommended by industry experts and also ones that have shown an excellent performance have been included.

Best Mutual Funds in India for 2012

In the following lines, a very well performing fund from each of the 4 classes and categories, have been described. Apart from that, a brief list of some of upcoming mutual funds has also been included.

1. Equity Funds
As the name indicates, equity funds have a maximum holdings in equities of the companies. Some of the common constituents of equity funds include mid-cap funds which go into mid-cap companies, diversified equity funds which go into diversified industries and sector specific funds which go into the funds of specific sectors. The Fidelity India Growth Fund (G) is one of the best funds to invest in India, right now. It is an open-ended growth fund. This fund's portfolio invests into sectors that predominantly includes banking and finance, followed by chemicals, pharmaceuticals, technology and metals, with some other funds used to invest in foreign markets. This fund has generated a maximum return percentage of 25.3% over a period of three years, with a minimum investment of Rs.5,000. Some of the other best funds in this category include:

• ICICI Pru Focused Bluechip Eqty (G)
• Franklin India Bluechip (G)
• Fidelity Equity Fund (G)

2. ELSS Fund
An ELSS or rather an Equity Linked Saving Scheme fund is basically a fund which has a lock in period of 3 years and an investment of less than Rs. 100,000. This fund qualifies for a tax exemption. Religare Tax Plan (G) is one of the best ELSS fund which aims at investing in growth destinations. With a minimum investment of Rs. 500, it has provided a 23.1% return, over a period of three years. This fund chiefly invests into sectors such as media, pharmaceuticals, oil and gas, technology, banking and finance. The usual investment channels are used, which include equity, mutual funds, money markets, cash and class, etc. Some of the other common funds in this class consist of:

• Canara Robeco Equity Taxsaver (G)
• Fidelity Tax Advantage (G)
• Franklin India TaxShield (G)

3. Balanced Funds
Balanced funds are the ones which used both, equity (stock) and debt funds (fixed income securities or I-owe-you instruments). Such funds chiefly profit from both the types of investments, namely, equity purchase and debt. HDFC Children's Gift (Inv) is a great high yielding fund with a Rs. 5,000 minimum investment. The common sectors in which this funds invests into include, automotive, engineering, consumer durable, pharmaceuticals and banking and finance. Some of the other funds in this category which have been performing really well consists of:

• Templeton (I) Pension Plan (G)
• UTI CRTS 81 (G)
• Birla Sun Life G-Sec. Fund - Long Term (D)

4. Monthly Income Plan (MIP)
As the name suggests the MIP provides a monthly specified income to the investors who have purchased units in the fund. HDFC MIP - LTP, is an open-ended growth fund which at a minimum investment of Rs. 5,000. This fund invests into banking, technology, oil and gas, metals and mining. As usual the channels of investments include cash and call, debt instruments, equity, etc. Some of the other popular funds from this class of mutual funds include:

• Birla Sun Life MIP II
• Canara Robeco MIP (G)
• Reliance Monthly Income Plan (G)

In aforementioned paragraphs, please note that the actual rate of return, wherever it was mentioned, will be paid by the companies in accordance with their planned schedule. The annual rate of return is subject to change, according to market conditions.